Many people in the energy game lose sight of what energy is really about. It is just one input to a system that delivers socially defined ‘useful services’. Energy is ‘essential’, however the technology that converts the energy into a useful service, and the desire to have a service provided are just as essential.

A key difference between energy and these other elements is that we are dependent on centralised large scale energy supply systems, while the technologies that convert them to useful services, other inputs (such as food and materials) and the desires for the services themselves, are dispersed and diverse. This difference reflects the historical evolution of energy systems, not a fundamental truth.

A dispersed and diversified energy system offers resilience, flexibility and empowerment. These advantages dwarf the claimed ‘cost-effectiveness’ of conventional energy systems in post-industrial societies. Who tries to minimise the cost of owning a BMW? Where is the cost-effectiveness of a home entertainment system? What people now seek is ‘value for money’ defined in very subjective ways linked to their values and lifestyles.

The efficiency with which we now provide most ‘useful services’ is very low. An incandescent lamp turns coal into light at an efficiency of around 2 per cent – and much of this light is lost in the light fitting. One of the exciting things about recent technology development is that it is allowing us to redefine services in ways that use much less energy. For example, video conferencing can avoid air travel. Personal video viewers can replace energy guzzling big screen televisions for many applications. Radical industrial processes based on biomimicry can operate at much lower temperatures and use much less energy. Well designed houses in most of Australia need little or no heating or cooling. International research is showing that factor four and even factor ten savings can be delivered – often quite cheaply, and with a better – and often redefined, standard of service.

At the same time, renewable energy options are beginning to capture economies of scale, and are improving in performance. One rule of thumb suggests that the cost of producing an item typically declines by about 20 per cent on average for each cumulative doubling in production. So when 8 times the initial production level is reached, costs have reduced by half. The economies of scale that will be captured by renewable energy far exceed this level.

We are also beginning to redesign the management of energy systems. Traditionally, demand management has aimed to provide a flat, stable demand that optimises the use of baseload generators and powerlines. We are moving beyond that: smart programmable demand management systems that users control will balance their requirements against cost and availability of supply. The cost of local energy storage is declining and the more efficient we are the less storage and energy generation we need. Meanwhile, the cost of providing conventional energy supply capacity for increasingly variable and sensitive demand is increasing. The aim in the near future will be to match demand to the varying available energy from a mix of low emission energy sources – with both demand and supply side playing complementary roles.

On the demand side, CSIRO and others are developing powerful programmable demand management technologies and local storage systems. On the supply side, smart technologies are redefining the game. For example, a combination of 36 wind, solar, biomass and hydro generators located across Germany are now being operated as one single integrated low emission power station, mimicking a conventional plant.

The biggest barriers to this emerging reality are our own minds, and the bizarre energy market framework that has been inflicted upon us. The emerging energy supply technologies have more in common with consumer goods than traditional power stations and gas fields. They will change fast, and be more diversified and resilient.

The all-electric house that runs on 5 kilowatt hours (kWh) a day – less than a third of today’s average, is close. And efficient homes that use other energy sources for hot water and cooking are already using 2-3 kWh a day. An efficient building envelope with a high efficiency air conditioner can centrally cool on the hottest day using around 1 kW of electricity. With smart load management, PV or other local generation, some local storage, and a communal back-up generator, these homes will not need to connect to the grid. In fact, energy suppliers may need to pay incentives for these smart, efficient homes to connect, to help them to minimise overall costs. Similar radical scenarios can be painted for the services sector and most industries.

We are in the early days of the equivalent of the replacement of the horse and cart by the car. But this time, we’ll be moving to a sustainable path. How many of us are ready?