Click hier voor Nederlandse versie From economics of scale to economics of numbers with residents
At higher policy levels—within governments and among large corporations—the dominant mindset revolves around large-scale systems. This is evident even a bit in progressive initiatives like Reformers, where innovative technologies such as hydrogen and flow batteries are discussed. While these technologies hold promise, it’s worth reflecting on the spirit of the times. The emphasis on scale is deeply rooted in economic education, driven by the principle of economies of scale. Schumacher’s “Small is beautiful” is occasionally cited, but rarely embraced in practice.
In microeconomics, economies of scale refer to cost advantages gained through increased production. In the Netherlands, this led to the creation of municipal energy companies from 1886 onward, which eventually merged into regional and provincial utilities. The Electricity Act of 1989 reinforced this trend by requiring a minimum production capacity of 2,500 megawatts—aimed at cheap, large-scale production. While logical for older production methods, this approach also brought higher distribution costs and energy losses.
Until 1998, utilities could both manage the grid and sell energy. Liberalization separated production and supply from distribution. Distribution companies retained a monopoly but were no longer allowed to produce or store energy, leading to a less integrated energy system.
Imagine a gas station that also sells sandwiches and drinks—it’s leveraging additional opportunities. Similarly, a grid operator could offer battery services at the customer’s meter box, adding value and helping to prevent grid congestion. But institutional restrictions prevent this. At the same time, there are hardly any subsidies for batteries, which hinders further development.
Meanwhile, small-scale, decentralized energy technologies are evolving rapidly. Solar panels are becoming more efficient and often generate energy during periods of low demand. Batteries can store this surplus locally, whereas cables would otherwise transport energy to areas that may also have a surplus. Curtailing solar production is an option, but it means reverting to polluting technologies when the sun isn’t shining.
Technically, decentralized storage is not a problem. If every household in a town like Heiloo had a 10 kWh battery, grid congestion would be minimal. But residents are waiting for lower prices, which only come with increased demand for batteries, a classic chicken-and-egg dilemma. For companies, economies of scale require more production. For batteries to be deployed efficiently, we need economics of numbers—widespread adoption by residents. This shift enables a sustainable, stable, and efficient decentralized energy system.
With enough batteries, energy losses in low-voltage networks disappear, and the system becomes more reliable. Where a cable failure might affect an entire neighborhood, batteries continue to function locally. Batteries are also cheaper to mass-produce, while cables and substations remain labor-intensive and relatively expensive. Unfortunately, there is a lack of clear government directions to support this scenario.
Conclusion
We’re stuck in an institutional framework where distribution companies are barred from leveraging the economics of numbers with batteries, and where government support for battery storage is minimal. As a result, revenue and knowledge development in battery technology and smart control lag behind, and an efficient decentralized energy system fails to take off. Battery prices remain high, and the necessary numbers effect doesn’t materialize for efficient energy uses.
