Economic consequences of a new, cheap, safe, 'infinitely available', energy source

Great Debates
1

If an alternative energy source was discovered that was cheap, safe (including being “environmentally friendly”), easily developed, used, and distributed, and was available in unlimited quantities, what effects would there be on the US economy? (let’s assume, rather unrealistically I admit, that this new source totally replaced other energy sources within a year or so)

Say, for example, that something along the lines of cold fusion became a reality, and that it became the near-exclusive energy source for industry, home use, and for most everything else. What would the economic consequences be?

In terms of the economy, you might predict that inflation would disappear and probably become negative (i.e. most things would cost less) since manufacturing and transportation costs (among others) would be greatly reduced. On the other hand, suddenly there would be a lot of money floating around. As a result, people would tend to go on a buying spree and businesses would tend to expand - until prices rose and interest rates rose, i.e. until inflationary pressures supervened.

Of course, there would also be dire consequences on those companies and enterprises built around the traditional energy sources. The oil companies would collapse and likely be joined in their misery by their counterparts in the coal mining and electricity generation industries (among others). This would result in substantial pockets of mass unemployment and presumably have a depressing effect on the economy. Certain sectors of the stock market would probably tumble.

A new energy source like what I’m imagining would also lead to major geopolitical changes. Obviously, most countries in the middle east would be out of business, and non-middle eastern oil rich countries would suffer a similar fate. Militarily, the need to be involved around ‘the Gulf’ would no longer exist. Current alliances, based on oil considerations, would dissolve. At the end of the day, with the energy supply now guaranteed, both the size and scope of the military could be reduced. That would generate huge cost savings and free up vast amounts of cash. Perhaps taxes could be lowered as a result. What would the net effect be on the economy of this changed geopolitical/military situation?

Bottom line, would there be a net positive or net negative effect on the economy if a new, cheap, “infinite”, safe, and easily distributed source of energy was discovered? Thanks!

2

Forget the US economy, the whole world economy shake rattle and roll. Cheap energy means prices fall, including the prices for parts to build more factories. The only constraint would by how much metals, ores, and human labor costs. High yield mechanized farming would spread alot faster, as would mass production. You’re looking at first world status in a generation or two for any country willing to be vaguely open for it.

If this new energy source can be used for rocketry then metals won’t even even be factor. At today’s prices, according to NASA estimates, the asteroid belt if equally shared among every person on earth would make every single person billionaires in mineral wealth.

Now obviously metal would fall drastically from today’s prices but yea. Your throw away silverware would be made out of metal.

3

Net positive, I think, after an initial rough period. Cheap energy would make all sorts of things so much easier and cheaper. In the long run, it would eliminate both the need for energy cutbacks to stop global warming, AND reduce the economic effects of the warming itself. It would make more practical all sorts of processes that are expensive due to the energy cost; mass desalinization by boiling the water for example.

It would go a long way towards solving water shortages for the same reason; there’s a growing shortage of drinkable water, not water in general. In general, it would allow many problems to be solved by the brute force application of lots of energy.

In the very long run, developing the solar system becomes much easier since you have so much energy available.

4

Well one long term problem comes to mind now. What do you about waste heat?

In the short term human development won’t be a problem, but what happens when energy use gets high enough actual waste heat starts to affect the temperature?

5

I think you’re over-estimating the rapidity of transition. You’re not going to replace millions of cars - or even just their engines - overnight. Let alone power stations and other infrastructure. And people will still need petrochemicals, countries will still need nuclear power plants, etc. Just look at the difficulty of transitioning to digital TV. Look at the difficulty of transitioning to broadband. Such a transition could easily take a decade or more. That’s still not long for the world to readjust but it would not be a sudden thing, and oil-producing companies would retain their importance, albeit at a lower level.

6

I don’t know about economic consequences, but I imagine there’d be a pretty big sociological effect leading up to it. Energy companies make money by charging for electricity. If a free or near-free source became available, rather than try to capitalize on it and become leaders in a new field, they’re probably throw a fit and do anything to stop it.

For example, consider what would happen if there were a proposal that, for the good of mankind, would put the massive profits of the health insurance industry at risk by making healthcare available to everyone for little to no money. Should such a loony thing ever occur, rather than the health insurance companies coming up with new ways to innovate healthcare for greater efficiency and effectiveness, they’d stoop to downright lying in order to prevent anything from changing.

Should this imaginary energy source be developed, it would be an uphill battle to get it to replace the existing sources. There would have to be an overwhelming public demand for this technology, and remember that public demand can be manipulated by a few million dollars in campaign contributions and PR firms.

7

I don’t actually think it would have much impact on most of the worlds’ population, including in the US, because I think it would be bought and owned and sold by the same powers currently controlling energy sources/everything they can. Consumers would not see any significant reduction in their fuel costs, but the controlling interests would see huge increases in profit. So if you happened to be a shareholder, you’d probably see your income rise substantially.

Call me cynical, but I do not for a moment think that such a boon would ever be made freely or even cheaply available to the masses. It probably wouldn’t even be made public. Imagine the power and wealth such a discovery would control. No way. It would be the Holy Grail, and as jealously guarded.

8

The OP posits free energy. Free’s free.

Contrary to popular belief, current energy costs are pretty proportionate to the rarity and difficulty of producing them, so why would this new energy source NOT be ultra cheap?

9

You wouldn’t happen to be writing a biz school application essay, would you? 'Cause I had a question exactly like this one when I was applying to some school–UNC, I think. Not that it isn’t an interesting question in its own right, of course.

10

Nope, not even close. I’m waaaay past the point of starting new career directions.

I had started thinking about it and realized that it’s not at all obvious that it (such an energy source) would be a good thing despite what you might think on first hearing it.

11

When the magic energy source is invented, there would probably be a big upfront cost associated with adapting our power grids, homes, or devices to carry this newfangled 'lectricity.

I suppose the least-costly scenario would be where this power comes from a device, say a small fission reactor or whathaveyou, that everybody has in their home or building. Then, you’d just need to connect it to your home electrical wiring the same as one would a portable gas generator, disconnect the “grid” line, and plug in your ipods and foot massagers like normal.

If it were a centralized technology that would still require “power plants” of some kind, there’d definitely be a big cost or nightmare converting everything. The power lines are owned by the power company, but are mostly on land owned by the city/state, so everybody would be arguing over rights. If the new technology required fancy new power lines, there’s even more cost.

After that, though, who knows. If you could buy a device for $100 that would power your home forever, would that alter your life significantly? You’d save that money going to the power company every month, but it wouldnt move you from middle to upper class.

The biggest difference would naturally be in third world areas previously without any (or reliable) power. Hospitals and schools could be set up in the midst of the bush. Would it instantly civilize the entire planet? Dunno.

12

One possible bad thing.

Folks would probably light up the night like there was no tommorow, with seriously bad ecolological consequences. Its bad enough as it is.

13

You’re kidding, right?

There’s only one kind of electricity. The energy source might be different but the whole electrons-moving-along-wires-AC thing would remain the same. Whatever you hook up at the front end, the distribution system deson’t have to change. EXPAND, perhaps, since people would want more juice.

You’re not going far enough. It’s not that I’d save a few hundred bucks in power; it’s that we’d have unlimited energy. Electric cars instantly become vastly more valuable. Industries save huge amounts of money. All industrial processes that are currently energy intensive suddenly become vastly cheaper. There’s no need for using oil for cars, trains, or energy production (you’d still need it for aviation.) Water shortages would suddenly become far less of a problem as desalinization (a very energy-intensive process) suddenly becomes cheap.

14

The electricity bill is not the only place where energy costs factor in, even in the household. Add your fuel costs, home heating, etc. That’s just the beginning. Lots of energy is required by industries for various things, and many new applications would become feasible that are now prohibitively expensive due to energy costs. Theoretically it could lower prices tremendously, and at the same time make new things economically workable.

15

The OP posits cheap energy, not free energy. That energy still has to be transported or transmitted from A to B. That infrastructure still needs to be funded.

16

I’ve got to shoutout to The Midas World by Frederik Pohl, where he posits just such a scenario of nearly free energy. Everyone is required to consume in order to keep the economy going, so only the rich are not required to eat and use all the time.

17

I know electricity’s electricity, but completely replacing one power plant with another can’t be a simple process. It wouldn’t be like in SimCity where you just delete a plant and replace it with a fancier one. You’d have to build a new distribution system, probably, maybe change the substation… orientation, or something. There’s a matter of distance with electricity, too, I believe.

Plus, if we were going to completely change the way we do power, it’d probably be best to switch to DC in the States. Computerized technology all requires DC power, which is why anything more complicated than a desk lamp requires a cumbersome wall-wart power adapter. If we went DC, we could do away with those altogether, which would save on wasted “wart leech” power, though with magic infinite power I guess that wouldn’t be that big of a selling point.

18

But why would you change the power lines in your HOUSE?

DC has an immense number of disadvantages, no matter what power costs.

19

I might have been a bit overzealous there, but in the scenario of one generator per household, you would need to adjust your home wiring to get off the grid. That’s usually a nontrivial task, though not as serious as needing to rewire the entire house.

I don’t think there’s any way to completely replace one technology with another without there being a somewhat significant cost. Take the digital transition, for instance. TV is TV, but adjustments still had to be made, people had to buy things (if they didn’t already have them), the broadcast stations all had to have their equipment converted, the studios had to convert to digital transmission/recording/etc. Nobody really put up a fuss, though, because it was in the interest of “the future.” Also, clearing up the analog frequencies for auction is going to make the FCC zillions of dollars.

I didn’t mean to insinuate the up-front cost would be prohibitive, just that it would be.

20

Can this power source be used for spaceflight?

Believe me, if the answer is “yes”…WOW!