Often times this blog serves as an idea scratchpad, where I try to provide a unique perspective on economics topics, or try to poke holes in traditional theory. As such, and since I don’t write full time for Substack, I do not try to keep up with current events without a “lag” between the event occurring and me writing about it. This post is an example, where I will be using Hurricane Ian, which struck near Naples FL a few weeks ago (Sep 28 2022) as an example of a broader point of how a place interacts with its population, energy, and economics.
Babcock Ranch FL is a planned community via a public-private partnership with the state and local governments, spanning parts of Charolette and Lee counties just outside of Naples. It is America’s first solar powered town- well suited for the “sunshine state.” It contains an 870 acre solar farm, solar tree charging stations, and the largest solar plus battery storage system in the country.
Babcock is home to over 11,000 people, average age of 54, and is experiencing a staggering 11% year over year increase in population. Homes in Babcock cost between $200,000 to over $1,000,000 and the community utilizes electric vehicle transportation, bike paths, trails, and lake activities (as long as you don’t have a gasoline powered engine.) It reads to me as a new-age retirement community.
The town usually generates more energy via solar panels than it consumes. Paired with an advanced storage system this town is a fantastic case study of the power (pun-intended) of renewable energy to service small towns around the nation.
Common criticisms with renewable energy is that they are generally:
Too expensive
Take up a lot of space
Intermittent- there needs to be a way to have access to power when the sun doesn’t shine and wind doesn’t blow
The first criticism is a bit outdated- previously it was the case that renewable energy was too expensive, but looking at the cost curves they are currently cheaper than nonrenewable sources and are expected to keep falling (see last week’s post on learning curves below)
The “taking up a lot of space” critique has merit. We would run out of space before being able to turn every town into a Babcock ranch, but that doesn’t mean that we need to power the grid with exclusively solar power. Offshore wind, nuclear, hydropower, hydrogen and maybe one day in the distant future nuclear fusion would make for a resilient and diversified grid.
Lastly, the intermittency problem crucially needs to be solved by advancements in battery or hydrogen technology. And linked previously there is good reason to suspect we will continue to make improvements in this space as well, cutting costs and increasing profitability.
But there is another problem I would like to propose. Resiliency. There is an economic trade off between upgrading the grid to make it more resilient to outages, natural disasters, etc. and just making the repairs quickly when outages do occur.
The solar powered Babcock also seems to have an edge with this resiliency. Since the grid in Babcock is largely decentralized (power does come from a large single solar farm but also comes from rooftops and trees) the town never lost power and structures were able to withstand 145 mph winds when hurricane Ian struck the state at the end of last month. Many communities in the surrounding Naples area were completely destroyed, while Babcock was largely unaffected.
I suspect that a large reason why community was able to survive so well was because it was built relatively recently and all the buildings were up to code, but the point being that using solar energy here with utilities built underground lead to high resiliency in the face of natural disaster. This could come in handy as natural disasters seem to be increasing over time.
Speaking more broadly, the interaction of a place and the people that live there seems to matter. In this example the town of Babcock’s median age is 54. It probably makes sense then to have a very resilient grid (in the event that losing power could mean severe illness or death depending on the condition of the population).
I think about this while walking around my small college town. There are many high tech features like ordering coffee directly through a university integrated app, classrooms that record audio automatically, and a Toyota Prius with an attached camera driving around parking lots to automatically read license plates and cross reference if the vehicle has a parking permit for that lot.
These are all examples of ways in which a place services their population. Imagine asking a retirement community to order coffee from their phones!
This train of thought leads me to recall a conversation with a dear friend of mine regarding home equity and equality. Buying your home is the American dream, and has been historically a way to accumulate wealth in this country. If you cannot afford a down payment and instead rent, you miss this opportunity and cannot pass wealth you would have accumulated in your life to your children. So why not have a place, similar to how a college town services students and a retirement community services retirees, where young professionals can live and work and accumulate home equity while meeting other young working age people?
You might be thinking- gee, this kind of sounds like any city… and you’d be correct! The median age of Houston TX is 33 years old and Houston is a great place to study (home to many great universities), work (many energy and financial companies are located there), and live.
But at the same time it can be easy to be priced out of the market in many urban areas, and home ownership is increasingly becoming out of reach for young people.
Those of you who already own your home who are reading this might be saying so what- I already own my own home what do I care! Fair enough. Maybe you subscribe to standard microeconomic models where the utility function doesn’t include others utility in it. But hey, I think some people’s utility functions might!
If you felt sorry for Floridians who lost everything during Hurricane Ian, or Ukraine, or another human crises, maybe your utility function does too. The basic theory says that utility for person i depends on a vector of prices p, and a value of wealth w.
u_i (p,w_i)
And similar for their demand of a bundle x goods
x_i (p,w_i)
But why not include at least one other, or maybe an average of some set of other’s utilities? Your own utility could increase when your spouses utility increases. Or it could increase when your rivals utility decreases.
u_i (p, w_i, u_j) where i is not equal to j
Surely my demanded bundle depends on the prices, my wealth, but also likely my own happiness level and at least someone else’s happiness
x_i (p, w_i, u_j)
I’m not a certified micro-theorist, so maybe there are some models that do include this. But I suspect the reason it previously hasn’t stems from the inability to solve such models, and it doesn’t work out nicely to teach to 1st year grad students :)
Maybe improved computational power will be the “spark” needed for this type of model.