The Complicated Cost of Energy in a Level 2/3 Situation

This four panel solar array measures 13.5' x 4.6', generates up to 920W of power, and costs $3500 (in Dec 2012).
This four panel solar array measures 13.5′ x 4.6′, generates up to 920W of power, and costs $3500 (in Dec 2012).

The ‘comfort’ level – some might say, the degree of advancement – of a civilization or life style can be closely approximated to its energy usage.

There’s a reason that we in the US are among the world’s largest consumers of energy, and it’s not that we’re wasteful.  It is because we enjoy a lifestyle that is generally better than most other nations around the world.  Just about anything and everything you do involves consuming energy.  Some of this energy consumption is obscured (for example, do you ever think of the energy consumed by shipping the 40 tons of goods we each require a year).  Some of it is assumed (for example, the energy that is required to make aluminum).  And much of the rest is taken for granted, even if energy used directly by you.

All of this ‘works’ for us because we are blessed with abundant and affordable energy supplies.

That will massively change in a Level 2 or 3 situation (see definitions here).

Life is both good and simple at present, and you seldom if ever consider the cost of the energy you enjoy.  And if you did want to, you could work out how much it costs to switch on a light, to run the television. to turn up the heating.

Well, perhaps better to say that in theory you can work out all these things.  Your utility supply company has a tariff, probably shown at least in part on every invoice you receive, showing the cost of each unit of power or gas you consume.  A bit of figuring and converting, and you can soon work out that, eg, if you’re paying 10c per kilowatt-hour (kWhr) for electricity, your computer is costing you 3.5c/hour to run, and the reading light in your bedroom is costing you less than a penny an hour, and so on.

These costs are generally so low that we don’t even think about them individually, although we might wince a bit when seeing our monthly or bi-monthly utility bill.

What will it cost us to do the same things if the grid goes down and if we have to live with only the energy we can make (or have stockpiled) ourselves?

The answer might surprise you.  Some things will be (sort of) free.  Other things will be so expensive that no amount of money will make them affordable (for example, an electric clothes drier).  Most of all, expressing costs in dollars and cents terms is no longer as relevant (because money, as an abstraction, will no longer be relevant).

Some Energy Might Be Almost Free

Let’s say you have some solar cells on your roof.  How much does that electricity cost you?  Sort of nothing.

Sure, it cost you a lot of money to buy and mount the array on your roof, and to buy a controller and run wiring and whatever else, but those costs are all now fully incurred.  So, in a sense, solar power is free, which leads to an obvious question and a necessary answer.

If Solar Power is Free, Why Don’t We All Have it Now?

The ‘variable cost’ of using the solar array you have installed for generating some power today might indeed be zero.  But while that cost today is zero, there was a substantial cost involved to install it in the first place, right?  You needed to buy the cells, install them, add electronic controllers, run wiring, patch them into your home power supply, and possibly set up a bank of batteries and regulators, too.

An accountant would also point out that sooner or later, the cells, wiring, controllers, and other related parts of the system will wear out, break, or in some other way fail and need to be repaired or replaced, so there are some future costs to be considered.

An accountant would depreciate or amortize the cost of the system over the total likely power generated during its life, and give you an average cost per unit of power as a result.

Furthermore, at present most of us enjoy amazingly inexpensive power from our utility companies.  The number of years it would take to pay for the up-front installation costs of a solar array can be substantial, and too long to make sense for many of us, in a situation where we are prepared to assume that we will continue to be guaranteed 24/7 access to unlimited affordable power, whenever we need it.

That is why everyone hasn’t rushed to buy solar arrays, yet.  But keep an eye on pricing – the payback time for solar arrays has been getting shorter and shorter, due to the massive reductions in the cost of the cells (thank you, China!) and the steady increase in regular utility-sourced electricity.  On the other hand, the US government has deemed that China has been ‘dumping’ solar cells into the US, and while you or I might be delighted at a chance to get bargain basement priced solar cells, and while you might think the greenies in the government would be delighted at China in effect subsidizing the US renewable energy movement by selling us product at below cost, that is, alas, not the case, and the government is looking at various trade sanctions to force China to sell them to us more expensively.

Anyway, back to the cost of solar.  These various accounting and costing issues are all correct, of course, but once you’ve installed and paid for a solar installation, then in terms of the actual incremental variable cost of using your solar cell array right now, the electricity flows with no extra money being spent by you, and with no need to ‘feed’ the solar cells with diesel or any other consumable.

About the only thing you’ll want to do is occasionally clean the cells, and even that is something you do at the same intervals, whether you’re using all the electricity generated by the cells or not.

So – from one perspective – this electricity is free.  Enjoy it while it lasts (which happily will probably be for 25+ years).

Some Energy Might Be Impossibly Expensive

Maybe you have an electric furnace, or an electric stove top.  Let’s say that one of these devices can take up to 10 kW of electricity when in use.  And let’s say that you can only produce 5 kW of electricity maximum from your generator set.

There’s nothing you can do.  No amount of money will get more electricity out of the generator.  You’re stuck.

Furthermore, how much does the energy created by your diesel generator cost?  There are two schools of thought on that, so please read on.

Some Energy Has a Very Different Historical and Replacement Cost

Talking about that generator – and let’s assume it is a diesel-powered generator – you know how much energy you get from the generator per gallon of diesel burned (we’ll say 10 kWhr per gallon which is a reasonably good rule of thumb to use).  You know that when you bought the diesel you are burning, it was costing you $4/gallon, so you know that each kWhr has an underlying cost of 40c.

But that is only correct if you can conveniently replace the diesel you are using, and at the same cost.  You are best advised to consider the cost of anything like this in terms of the replacement cost of the source fuel you are consuming, rather than in terms of the historical cost.

If there’s no more diesel to be had, then the cost of the diesel you do have has just gone up massively, hasn’t it.  What is the replacement cost of a gallon of irreplaceable diesel fuel?

You’ll need to start thinking of sourcing/creating bio-diesel for the future, or other completely different means of being able to generate electricity as and when needed, and you’ll need to consider what the costs will be and how sizeable the supply may be.

Note the phrase ‘as and when needed’.  That is the very significant difference between solar and wind power on the one hand, and a diesel generator on the other.  Solar and wind power only flows when the sun shines or the wind blows.  Much of our power needs would normally be later in the day and at night when it is cold and dark, and when we want to cook our evening meal, and this is a time when the winds typically calm down and of course, the solar cells stop entirely.

So a diesel generator and its diesel fuel can not be replaced by solar or wind power, unless there is some way of storing up the power so it can be used when it is needed rather than when it is generated.  The most common means of power storage – lead acid batteries – is clumsy and the batteries have finite lives, both in terms of years and also in terms of the number of charge/discharge cycles they can withstand.

The True Cost of Energy in the Future

Replacement cost is the true cost of energy in the future.  And when we talk about ‘cost’, we don’t mean dollars and cents.  We mean ‘How long will you have to work, what will you have to do, in order to create the energy you are about to consume?’.

We see a future where energy becomes the key measure of one’s ‘wealth’ and the means of measuring one’s energy value is the amount of time it takes to create the energy you have and use.  This will give you a meaningful way to appraise the appropriateness of any particular energy use.

For example, if running your electric dishwasher saves you 30 minutes of time, but if the work required to provide the power for the dishwasher requires two hours of your time, then who will want to use their dishwasher any more?  It just doesn’t make sense to work for two hours in order to save 30 minutes of time.

But if one hour of work provides you with light and video or audio entertainment for four hours, that is probably an acceptable ‘cost’ – assuming, of course, that you have a spare hour of time to allocate to creating that energy.

Which touches on the other part of this equation.  How much is your time worth and how much extra time do you have?  If you are locked in a desperate struggle for survival, all day every day, simply working your land to create food to subsist on, then you probably don’t have either the time to create the energy to power your home entertainment system or the spare time to then enjoy it in the evening.

Some things are harder to equivalate.  It is easy to say, in the dishwasher example, that it makes no sense to work for two hours to save 30 minutes, but what say you are instead considering ‘I have to work for two hours to increase the temperature inside by residence by 5 degrees for a day’?  Which is better?  More clothes and blankets and less work, or more work and more comfortable home temperatures?  Of course, that depends – if the ambient temperature is 40 degrees, you’d probably work to bring the temperature up, but if the temperature is already 65 or 70 degrees, maybe it becomes less important and other things take higher priority.

Nonetheless, a key measure of energy will become the number of man-hours it takes to create a given amount of energy.

Energy Opportunity Costs

So we’ve just said the key measure of energy ‘costs’ in the future is the number of man-hours it takes to create a given amount of energy.  Yes, that is true, but there is more to it than that.

Another issue is the ‘opportunity cost’ of any particular energy use.  By ‘opportunity cost’ we mean that you will typically find yourself in an ‘either/or’ situation – either you use some energy for one thing or for another thing; whereas at present we seldom have to choose, and can happily choose ‘both’ as our preferred option, that will not be the case in the future.

So you might find yourself with ‘low cost’ energy (eg solar) but with insufficient of it to power everything you want.  You then have to decide on an either/or basis – either I can use it for this or for that – and the value/benefit of the thing that you don’t use it for represents the ‘opportunity cost’ of the energy.

Only when you can have every electrical appliance switched on at the same time does the opportunity cost dwindle down to zero.

At any given time, your energy cost needs to be considered as a measure of the most expensive energy source you are using for the final ultimate kWhrs of energy you are consuming.  Sure, some of the total energy being consumed might be ‘free’ solar, but the fact clearly is that if you reduce (or increase) your energy consumption, the thing that changes first is your use of your least desirable/most expensive energy.

Energy Covers More than Just Electricity

You need to consider your energy needs – and the solutions/sources for them – not just narrowly in terms of electricity.

While electricity – if in abundance and appropriately priced – has the benefit of being able to provide energy for almost any and all requirements, in a Level 2 or 3 situation, the chances are that you will almost certainly not has as much electricity as you would like, and the cost of at least some of the electricity you use, at some times of day, will be very high indeed.

Furthermore, by diversifying your energy sources, you reduce your dependency on a single source.

Some examples of non-electrical energy sources and applications would include solar heating for your hot water, a wood stove for interior heating (and possibly also to heat water too), or a piped hot water system for heating powered by a wood burning boiler.  A gas-powered cooking range is another example, as is a wind powered water pump, maybe even a water powered mill if you’re fortunate to be close to a river.  A horse-drawn cart is an alternative to a gas or diesel-powered wagon.  Hanging washing out to dry on a clothesline rather than using an electric tumble drier.

Your best energy sources will depend on where you live and what is available to you, and may vary depending on the season.

Some Energy Will Cost More at Some Times than Others

The law of supply and demand will of course apply much more strongly than it does at present, and particularly because it is very difficult to conveniently store energy at times when it is being generated in quantities greater than needed at the same time.  Lead-acid batteries of some type or another are the best choice for many people when it comes to storing surplus energy, but they have a very finite life and when that has expired, you will find it difficult to replace the batteries with new batteries.

A more promising technology is a flywheel with magnetic bearings.  This can store energy with little loss for 4 – 8 hours or even more – enough to tide you over an evening until the next day and the resumption of solar power generation.

However, as an interesting aside and an insight into the considerations you’ll have to think through when you become, in effect, your own electricity utility, although most of us pay the same amount for every kWhr of energy we consume, the underlying cost to the utility company can vary enormously depending on the time of day we are consuming it.

For example, a utility might have some of its power sourced from hydro-electric power, some from gas/oil/coal fired power stations, and some from nuclear power.  In addition, it has an agreement with other utilities to sell its excess capacity to them, and a matching agreement to buy excess capacity from the other utilities if/when needed.

Maybe the utility’s cheapest electricity is from its hydro stations, then its next cheapest from its gas-powered stations, then from nuclear, then from oil/coal, and its most expensive electricity is when it has to buy it in from other utilities.

At some times of day, the utility might be able to provide all the power needed by its consumers via its hydro generating capabilities.  But at higher demand periods, it has to ramp up its other power generating capabilities, and at peak demand, it might have to buy in more power, possibly at a cost of as much as ten times greater than its hydro-power.

A similar situation will apply to you in your retreat.

During the day, with the sun shining strongly on your photo-voltaic cells, you might be able to meet all your energy needs from the solar array(s) you have.  This is sort of ‘free’ energy, other than perhaps having an opportunity cost because maybe there is insufficient surplus to concurrently recharge up your lead-acid battery bank – power that you’ll need overnight when the sun has set.

If you have wind power, that too will rise and fall in terms of the amount available to you, and at times may be abundant, while at other times may be inadequate.

In an evening, you might have multiple sources of energy.  You might have a wood burning stove to provide warmth in your dwelling and perhaps to also heat up your hot water supply.  You might have a propane powered stove to cook on.  Electrical appliances might be powered by a bank of lead-acid batteries, and/or possibly by a diesel generator.

Your hot water might be solar heated, but if you use too much of it, you’ll either end up with cold water or need to use an additional energy source to heat the water until the solar heat returns the next day.

You might think that the wood for the stove is free, but just because you’ve not handed over cash to someone in exchange for the wood does not mean it is free.  You’ve had to first grow the tree, then you’ve had to fell it, cut up the logs into fireplace sized chunks, and transport it from where the tree grew to where your residence is.  All of that consumes a lot of your time and effort.

Adapting Your Lifestyle to Your Energy Sources

Many years ago, rural dwellers kept much simpler lives and schedules.  For example, they would tend to get up when the sun rose, and go to bed after the sun set.  This concept has been partially applied to the notion of daylight saving time which possibly saves a small amount of energy each daylight saving season, as well as probably enhancing our lives by matching our waking hours more closely to the daylight hours.

You need to adopt similar strategies in a Level 3 situation, and probably also in an extended Level 2 situation.  There are other things you can do as well.  For example, use electricity for tasks when it is most abundant – if you are fortunate to be able to power an electric washing machine, only run it when the sun is brightly shining (or the wind blowing) and you have an abundant inflow of electricity.

If you have solar heated hot water, plan your main hot water draws at times when the water is most likely to be sufficiently hot to use, and ideally when there is still a chance for the replacement water to be heated some, too.  In other words, take showers and baths in the afternoon rather than in the morning or at night (oh, and one of the first things to go will be our current ‘indulgence’ of showering/bathing every day and sometimes even more than once a day!).

Time your energy needs for cooking to an appropriate time of day that aligns with your energy source availability and chance your meal schedule to match.  If this means you have your main meal at lunchtime rather than dinner, so be it.  Many people do so already, and indeed, it is generally considered healthier to do so.  Some medical experts say that we should eat our food in a direct inversion of the way people often eat at present.  Instead of a small breakfast, medium lunch and large dinner, we should have a large breakfast, medium lunch and small dinner.

And, of course, set your sleep patterns so that you’re not ‘wasting’ daylight hours asleep at one time of day and then needing to use energy to create light at a different time of day.  Although lights are one of the smaller energy consumers, they are generally needed at a time of day when energy is most expensive (ie no solar) and so it is important to minimize your light requirements.

The Ideal Energy Source

If we were in a perfect world, we’d choose hydro-electric power as our energy source.  Why?  Because it is a 24 hour a day source of reliable power, limited only by the daily water flow and any seasonal reductions in water volumes.

But hydro-power requires lots of water and a sizeable drop in water levels to work.  As a rule of thumb, to calculate the power generation capabilities of a hydro station, ,multiply the water head in feet by the water flow in gallons/minute, and divide the answer by 10 to get the number of watts being generated.  In other words, with a 10′ head, you get one kWhr of electricity from every 60,000 gallons of water.  A greater water drop (ie head) would reduce the water volume required, and as a practical matter, if you have much less than 10 ft you start to have too little water pressure to effectively harness (about 8′ is currently considered the minimum).

Even if you have a possible water source on your property, EPA and other restrictions (both federal, state and possibly even county level too) may restrict your ability to take over any streams/rivers on your property, and therefore will constrain your ability to construct a dam and micro/mini hydro generating facility.  You’d need to carefully check this out, but if you have water rights to the stream, that is a good first step that may lead to approval.

Hydro electric power is characterized by high capital costs to create possibly a dam and the generating facility, but once it is in place, it then has of course no ongoing costs and is relatively undemanding in maintenance requirements.  A close to ideal source for after TEOTWAWKI – and, of course, noting the essential need to diversify risk in everything you do, you’d want to back it up with solar and other energy sources as well, ‘just in case’.

There are types of ‘in river’ turbine generators that you can simply drop in a river and use to extract some of the energy from the water that flows past, but these are very low powered units.  On the other hand, they might provide a useful source of power for night-times when your main solar sources become inactive.

Planning Ahead

When you design and build a retreat, you need to plan its design based not on the current energy abundant situation we enjoy today, but on an adverse situation in which we need to move to our retreat and become self-sufficient.

This means that a major focus on your retreat construction has to be energy efficiency.  Construction techniques that make no sense when energy costs only 10c/kWhr become much more appropriate when energy costs spiral to a future equivalent of, say, $1 or $2/kWhr, or the even uglier reality whereby you’ll be ‘energy poor’ and have insufficient energy for your basic needs, no matter what the cost.

Before you even start to design and construct your retreat, you need to apply these considerations to where your retreat will be located.  In a hot climate, you might prefer a sheltered area that doesn’t get so much sun, but in a cold climate, you might need an area with great southerly exposure.

Clearly the dwelling will need to be super-insulated, and built around its incorporated heat (and possibly cooling too) sources, rather than having them added on almost as an after-thought and as a low priority.  You might have to compromise some eye-appeal for functional survivability and energy efficiency.

For example, don’t run heating/cooling ducts through the basement areas or crawl spaces – run them through the living areas of the house.  You probably don’t need to heat or cool the basement and crawl spaces, but by keeping all the ducting inside your house’s living areas, there is no ‘wasted’ heating/cooling.

One happy coincidence – walls with enhanced insulating properties tend to be stronger walls in general, better resistant to hostile attack and adverse weather.

Here’s one resource to get you started on considering such things.  Here’s another, but it aims to merely enhance your home’s energy efficiency by 15% over a 2004 published standard – that’s massively underachieving in terms of what your objectives should be.


The biggest change in our lives, come a Level 2 or 3 situation, will be our transitioning from our current ‘energy rich’ lives to a future ‘energy poor’ existence.

At present, we happily never really need to consider about reducing our energy consumption, other than being motivated by a (probably misplaced and altruistic) desire to ‘save the planet’ by cutting down on our energy use, and energy is so cheap that most advanced energy-saving strategies fail to be cost-justified.

This will massively change when we have to create our own energy rather than have it appear, as if by magic, out of the sockets in the wall.

We need to plan and prepare for an energy-scarce future, and to take steps to reduce our dependence on energy so that we can still live comfortable lives, with massively reduced ‘energy footprints’.  We need to build our retreats based not on present energy costs, but on the future costs (and availability) of energy after TEOTWAWKI.

Solar is becoming affordable and effective, but only when the sun shines, and probably not for all of the energy-consuming devices in a typical house (unless you have a large budget and are in a very sunny location).  Additional energy availability for evening and winter times will be the biggest challenge for most people.

One Reply to “The Complicated Cost of Energy in a Level 2/3 Situation”

  1. Julie

    Lots of great suggestions for using modern technology to later go “off the grid”; but what about when the parts to your generator (of any type) start failing, or the photovoltaic cells on your solar panels (or other electrical components) go bad? I’m guessing it will become pretty hard to obtain replacement parts pretty quickly. If the Level 2/3 disaster only lasts 10-20 years before things start returning to “normal” (interstate commerce, international trade, etc.), then maybe having a few replacement spares for everything will be sufficient; and I would guess a lot of people will be relying on things like this to see them through.

    But, what if it is a really big disaster, and modern society as we know it is hard down for the foreseeable future – say, 100 years or more? Sooner or later, all of the parts will wear out, and unless someone can figure out how to make replacements using the basic skills of a blacksmith/silversmith, and with metals and other materials mined from a source that can actually be obtained in your area, it seems pretty certain that solar panels and modern electrical generators will eventually fall by the wayside.

    To the best of my knowledge, the Amish are still living a pretty comfortable lifestyle (in terms of heated houses and plenty to eat) using the mostly pre-industrial technology of the 1700’s or 1800’s. If something does come along to wipe out all of our microchips (e.g. EMP), AND they can manage to survive the initial period of panic (given their commitment to a nonviolent lifestyle), I can envision the Amish doing a land office business not only in selling the products they make, but also in training individuals from all over the country in the all-but-lost arts of blacksmithing, candlemaking, and buggy-making. It will take a while, but eventually – IF things go well, and are not irretrievably lost in chaos and violence – we may see a resurgence of the local blacksmith in every community, and a return to horse power (literally) as one of the main sources of “energy”.

Leave a Reply

Your email address will not be published. Required fields are marked *