Cloudonomics: The Business Value of Cloud Computing, + Website

Distributed Power Generation

For the past century, we’ve gotten electricity from service providers for a variety of reasons: It’s easy and convenient to do so; it requires no up-front capital investments; and running our own generator would require allocation of space, personnel, and skills. But perhaps the biggest reason is that it’s relatively inexpensive. But let’s do a thought experiment. Suppose that someone invented a safe, shoebox-size power generator that you could buy for a dollar and self-install in your basement in minutes. Let’s also assume that it ran for a decade or two. Not only would it save money, but it would be inherently more efficient since power transmission and distribution waste resources: Much of the electric energy goes to heating up the power line rather than rather recharging your tablet.

Such a scenario is not that far-fetched, after all. Nuclear submarines have been in service for half a century, sales of solar cells are going through the roof, and we can’t rule out a disruption such as fuel cells or cold fusion or something that would make the scenario work. In other words, rather than computing increasingly replicating the electric utility model by moving into the cloud, electricity might increasingly parallel pre–cloud computing environments, deployed on consumer and enterprise premises.

Right now, though, the power utility has the upper hand, for several reasons. First, there truly are economies of scale in power generation. Power utilities use ...