Why we’re leaving the electric grid
A parody
We have been running on the electric grid exclusively since we started our business many years ago. We’ve run extensively in both Pacific Gas & Electric and Southern California Edison. We’ve run on fossil fuels, we’ve run on nuclear, we’ve run on renewable energy sources. We’ve seen all the electric grid has to offer, and tried most of it. It’s finally time to conclude: Buying electricity is (mostly) a bad deal for medium-sized companies like ours with stable growth. The savings promised in reduced complexity never materialized. So we’re making our plans to leave.
The electric grid excels at two ends of the spectrum, where only one end was ever relevant for us. The first end is when your company is so simple and low consumption that you really do save on complexity by starting with a fully managed electric grid. This is the shining path that Pearl Street Power Station forged, and the one that has since been paved by the Duquesne Light Company and others. It remains a fabulous way to get started when you have no customers, and it’ll carry you quite far even once you start having some. (Then you’ll later be faced with a Good Problem once the bills grow into the stratosphere as usage picks up, but that’s a reasonable trade-off.)
The second is when your energy consumption is highly irregular. When you have wild swings or towering peaks in usage. When the baseline is a sliver of your largest needs. Or when you have no idea whether you need ten kilowatt hours or a hundred. There’s nothing like the electric grid when that happens, like we learned when launching our company and suddenly 300,000 users signed up to try our service in three weeks instead of our forecast of 30,000 in six months.
But neither of those two conditions apply to us today. Yet by continuing to operate on the electric grid, we’re paying an at times almost absurd premium for the possibility that it could. It’s like paying a quarter of your house’s value for earthquake insurance when you don’t live anywhere near a fault line. Yeah, sure, if somehow a quake two states over opens the earth so wide it cracks your foundation, you might be happy to have it, but it doesn’t feel proportional, does it?
Let’s take us as an example. We’re paying over half a million dollars per year for power generation and transmission fees from PG&E. Yes, when you have many tens of thousands of customers, there’s a lot of energy needed, but this still strikes me as rather absurd. Do you know how many insanely beefy windmills you could purchase on a budget of half a million dollars per year?
Now the argument always goes: Sure, but you have to manage these windmills! The electric grid is so much simpler! The savings will all be there in labor costs! Except no. Anyone who thinks running a major service getting power from the electric grid is “simple” has clearly never tried. Some things are simpler, others more complex, but on the whole, I’ve yet to hear of organizations at our scale being able to materially shrink their in-house electricians, just because they moved to the electric grid.
It was a wonderful marketing coup, though. Sold with analogies like “well you don’t run your own datacenter either, do you?” or “are substations really your core competency?”. Then lathered up with a thick coat of NEW-NEW-NEW paint, and Electric Grid has (literally) beamed so brightly only the luddites would consider running their own power plant in its shadow.
Meanwhile PG&E in particular is printing profits selling electricity at obscene margins. PG&E’s profit margin is almost 11% ($2.3b in profits on $21.6B in revenue), despite huge investments in future capacity and new services. This margin is bound to soar now that “the firm said it plans to integrate innovative technology to make the power grid smarter and more resilient.”
Which is fine! Of course it’s expensive to buy electricity from someone else. But it’s never presented in those terms. The electric grid is sold as power on demand, which sounds futuristic and cool, and very much not like something as mundane as “buying electricity”, even though that’s mostly what it is.
But this isn’t just about cost. It’s also about what kind of electric grid we want to operate in the future. It strikes me as downright tragic that this decentralized wonder of the world is now largely operating on generation facilities owned by a handful of mega corporations. If one of the primary distribution centers goes down, seemingly half a state is offline along with it. This is not what Thomas Edison designed!
Thus I consider it a duty that we do our part to swim against the stream. We have a business model that’s incredibly compatible with owning turbines and writing it off over many years. Growth trajectories that are mostly predictable. Expert staff who might as well employ their talents operating our own turbines as those belonging to PG&E or Florida Power & Light. And I think there are plenty of other companies in similar boats.
But before we more broadly can set sail back towards lower-cost and decentralized shores, we need to turn rudder of our collective conversation away from the electric-grid-serving marketing nonsense about running your own datacenter. Up until the early 20th century, everyone operated their own gas lights and candles, and much of the progress in technology that enables the electric grid is available for your own electricity generation as well. Don’t let the entrenched electric grid interests dazzle you into believing that running your own power plant is too complicated. Everyone and their dog did it to get the electric grid off the ground, and it’s only gotten easier since.
It’s time to trip the breaker on the electric grid and embrace this completely delusional idea.
Original article by DHH: https://world.hey.com/dhh/why-we-re-leaving-the-cloud-654b47e0
Some additional context:
