What is Decentralized Energy?

Decentralized energy is energy that is generated off the main grid and produced close to where it will be used rather than at a large plant elsewhere and sent through the national grid. A decentralized energy system can serve a single building, a whole community, or an entire, small city. Most of them produce energy via renewable sources.   

Energy Crisis

It is not very hard to understand that by each passing year demand for energy exceeds the current capacity. With more intense heat waves and our aging grid transmission lines, it is not a very good idea to only depend on the national grid. 

Energy insecurity carries a massive social and economic cost. We have already faced the consequences of the lights going out in August 2020. It cost us more than just money.  Hence the drivers behind this new energy revolution are pretty much clear.  

Why is it important?

Among the advantages of decentralizing energy is a reduction in transmission losses, making the system more efficient than a centralized energy system. Increased security of supply and economic benefits. Long-term decentralized energy can offer more competitive prices than traditional energy. 

It also helps to reduce carbon emissions as many decentralized energy systems are powered by renewable sources. These are more reliable and less vulnerable than centralized energy systems.

How your home or office building can help you

In many developed parts of the world, older buildings whether industrial or residential, are energy inefficient. Therefore, making them more efficient by renovation gives an opportunity to reduce carbon emissions. During their overall life cycle, residential buildings currently represent around 40% of total energy use and 36% of greenhouse gas emissions. Much of this is attributed to out-of-date, inefficient buildings.   

In this process of making a building energy efficient, the building is transformed into a singular unit of decentralized power through the installation of solar panels, thermal reservoirs, and heat pumps. The same is designed with the goal of making inefficient buildings climate-neutral, energy-efficient, and more attractive. 

After being modernized, some of the efficient buildings are said to produce more power than needed. The surplus power then can be fed into the public grid, making the building act as decentralized power plants. 

The Debate

While the concept of a decentralized power plant may sound attractive it also has its own pushback. Critics point out that solar panels on commercial and residential buildings cost up to four times as much per watt compared to large-scale solar installations.  

It is somewhat true, but they have overlooked myriad benefits and avoided costs associated with decentralized power plants. One of the biggest benefits is being close or at the point of need, rather than being several miles away.  


Homeowners of Northern California with their own small power grid with significant decentralization component can be asked the potential benefit of it when in August 2020, PG&E cut the power off to avoid further spread of wildfire. 

There is no doubt that rooftop solar panels and distributed power plants can reduce the need for power lines. This can be verified by the fact that in 2017-18’s California transmission plan; 20 new transmission jobs were cancelled and more than 21 were modified, all because of increased use of solar power is changing the load predictions.  

The message is clear. Centralized electricity production is the technology of the past. Homeowners, as well as industrialists, should take this into account and make an informed choice for a more efficient, more reliable, cleaner, and economically efficient future of electricity.