In Persistent Power Shortage, Invest in Off-Grid Systems Rather Than the Main Grid

"Let's keep the AC on, so that the bedroom stays cool when the power goes out again," my casual quip to my wife before we went for a walk sounded quite rational given all that we went through the past few days. After almost three days of constant power outage, household appliances whirred back to life, hopefully ending once and for all the days of sleep on the roof balcony, sweat soaking against cardboard boxes as we waited for the occasional night breeze. But with the giant generators parked around the street corner to power the neighborhood, the electricity could go out any minute.

When I reflect on what I just said, what comes to mind is the historical photographs of Soviet citizens queuing for hours in front of the state-run bread shop. They were accompanied by the more recent images of motorists queuing in front of gas stations in their neighborhood, lugging around containers to fill up, beyond the tanks of their cars and motorcycles. In the classic shortage economy, where the supply of essentials far outstrips the demand, demand becomes irrationally hyperactive, as people hover up and hoard limited supply.

The mentality is understandable. In precarity, people tend to consume in the short term. Recognizing that the comfort of an air-conditioned room may not be available later on, we immediately buy it while we still can. The same is true, just more visible, for gasoline and bread. It might not be essential to have that much now, but when the future is uncertain, it is good to store some in reserve. And who knows, if others are desperate enough, the unused reserves can even be sold for a tidy profit. Thus, shortage beckons more shortage, and panic about not getting enough becomes a self-fulfilling prophecy. 

Beating the shortage economy requires a free market. When companies see prices high enough, the commercial incentive of starting and increasing production becomes too difficult to ignore. When COVID-19 first hit, anyone with any manufacturing expertise started producing face masks. The market's pricing signal lures new supply, which accumulates into an overflow that eventually negates the psychology of shortage. If anyone can see that something is widely available, to overconsume is no longer rational, just wasteful.

Unfortunately, this mechanism does not work for your average electricity generation and distribution company. Decades of fixed asset investments in transmission towers, wiring, and substations cannot be conjured overnight by the most zealous and well-funded startup. With the raw materials for these pieces of hardware needing to be imported from abroad, even the incumbents need time, not just money, to increase the upper limits of supply. When a shortage economy hits the electricity market, no amount of high prices can quickly solve the engineering and financing bottlenecks. 

The supply must then come outside the standard means of power generation. Albeit expensive, days of power outage have encouraged some Maltese to dust off their diesel generators, trading noise and the frequent need to top up fuel in exchange for at least some cooling fans and charged phones. It risks just pushing the shortage economy elsewhere rather than solving it. A not-so-household good that is the small-sized generator understandably has a limited stock on an island of half a million people, and fuel can quickly run out too if everyone starts using it for powering their homes and sleeping in their cars.

A more lasting solution is, ironically, sitting right on top of the roof balcony I was sleeping on days earlier. Many of the Maltese houses already host solar panels, but only for the sake of heating up water for showers and, in my case, sent back to the national utility company so that the landlord can make some extra money on the side. When a power outage hits, these panels continue to generate power, but the house's residents can never access it. Why not just invest in battery storage so that at least some of the power can be captured for use in an emergency? 

Indeed, rather than hoping in vain that the extra investments in the main grids can keep up with the ever-increasing peak demand for an ever-increasing population, why not invest the equivalent to subsidize off-grid systems? If the average resident knows that they can just switch to battery-stored power when the power outage happens, then the unpredictability of the main grid's power supply becomes a moot point. And the peak demand would fall too. With no anxiety about missed comfort later on, no one will need to overconsume air conditioning now.