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Time to cut the cord on global power grid

Think how quickly we evolved from landline phones, that took weeks to install, to cellphones that take a few minutes to buy and activate. Some of the same dynamics are about to force traditional energy utilities and grids to cut the cord and evolve to a 21st century customer-driven distributed energy market. Here is a summary of the why-what-when for cutting the old-school cord.

Electrical outlet
Yagi Studio | Photodisc | Getty Images

Why?

Do a Google search for "power outages" and there's never a day that goes by without one, somewhere in the world. In early November 2014, for example, 13,500 homes lost power to a storm in eastern Massachusetts at the same time that Bangladesh suffered a nationwide blackout when its grid experienced a "technical glitch."

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Then there's the true cost of massive power plants connected to aging grids. Take nuclear power, for example. According to one UN report, some 80 nuclear power reactors will have lived their useful lives and need to be decommissioned in the next ten years. One reactor creates an average of 566,400 tons of radioactive waste and the average costs of decommissioning in the U.S. is about $500 million or up to 15 percent of the initial capital cost. In France, decommissioning their smaller reactors costs closer to 59 per cent of the reactor's initial cost. Add to this the risks and costs of disasters such as Fukushima, Japan at $100 billion and Chernobyl at $15 billion of direct loss plus an estimated €235 billion for Ukraine and €201 billion for Belarus in the thirty years since, and it's clear that something needs to change.

What?

India already has 31,000 megawatts of renewables (equal to about 60 percent of California's entire power grid) and "off-grid energy systems" in India will increase by some 30 gigawatts, valued at over $60 billion, by 2030, according to K.S. Popli, Chairman & Managing Director of the Indian Renewable Energy Development Agency (IREDA). This will include electrifying irrigation pumps and rural households; microgrids for small villages; and using solar thermal technology to heat water in factories. He explained that these developments are not happening by accident, but is a "priority sector for government, lying at the intersection of sustainable development, climate change and energy security."

In Brazil, another fast-growing economy, Renata Leite Falcão of the giant utility Eletrobras told me last month that her nation's push to distributed energy was aimed at reducing risks to hydro-power production in drought conditions (as much of the country is enduring now); reduce transmission costs; and to meet CO2 emissions reductions goals. She cited a PWC study of utility executives that predicts a shift to at least 50 percent distributed renewables in South America and Africa in the next 20 years, especially to meet new demand.

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And in a very different example of what this trend looks like, companies such as Cisco Systems, 3M, Kimberly-Clark and National Geographic are helping their employees put solar power on homes with easy-to-navigate online systems and incentives. This is possible because both small and utility-scale solar has now dropped to prices comparable to grid-connected sources in many parts of North America, Europe, and China.

When?

The answer to this one should already be apparent based on the examples just described: now. To further demonstrate that claim, here are some investment drivers and opportunities to watch in 2015.

First, there are 1.4 billion people who aren't connected to a grid at all and who don't live in places where anyone is likely to make massive investments in centralized power any time soon. In India, IREDA reports that there are over 250 companies supplying components for off-grid solutions, at small and large scale, and the agency offers low-cost financing to facilitate uptake and reduce the risks of non-payment of electric bills.

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Big companies like LG are getting into the market too with what it calls a "Complete Energy Value Chain," the production, storage and efficient use of clean energy, including products like high-efficiency solar panels; efficient batteries and a smart energy management system that allows you to store wind or solar when those resources are available and use the resulting energy when needed; and the world's first web-controlled "Smart Micro Grid Solution" that can combine these technologies for a campus or village.

But perhaps the biggest bet on a new energy paradigm is being made by Tesla's founder, Elon Musk, who is building a $5 billion "gaga-factory" in Nevada to make energy storage systems for cars, homes, businesses, and micro-grids, which are already being used by companies like Solar City and Walmart. One observer noted that these products will soon be available in every Home Depot, which leaves the old grid business model "with no place to hide."

Change doesn't always happen swiftly or smoothly, but in a world where people want more control over their entertainment, communication, and transportation, utilities that rely on operating a grid for profits may want to observe those precedents, then follow the old Apple slogan and start to "think different" in 2015.

Commentary by Terry Tamminen, former secretary of the California Environmental Protection Agency. He is also the president of Seventh Generation Advisors and co-founder of the R20 Regions of Climate Action. Follow him on Twitter @terrytamminen.