Big Power Goes Local

In the late 1990s, the town of Freiamt in Germany's Black Forest decided to take the fight against global warming into its own hands. Three hundred of the town's 4,300 residents chipped in to buy the four 80-meter-tall Enercon wind turbines that now top the surrounding hills, generating 1.8 megawatts each. An additional 270 families put solar collectors on their roofs to heat water and power their homes. Three businesses—two sawmills and a bakery—whose land abuts a gurgling stream have installed old-fashioned water wheels, each providing an additional 15 kilowatts.

To make up for shortfalls when the sun doesn't shine or the wind doesn't blow, one of the local farmers invested in a "biogas" fermenter, which uses enzymes to turn grain and agricultural waste such as manure and chaff into methane. The gas, in turn, fires up an electricity generator. And rather than simply release heat given off in the process into the air, as conventional power plants do, the generator pumps the waste heat into nearby homes, where it's used for water and space heating, through pipes laid by volunteers. But the prize for Freiamt's most creative source of energy surely goes to Walter Schneider, a local dairy farmer. To harness the energy set free when the milk from his 50 cows is chilled before transport, Schneider installed a heat exchanger that uses the heat from the cow's milk to warm the water he needs for cleaning and showering. Today, the Freiamters are proudly self-sufficient. What's more, in 2007 they generated an extra 2.3 million kilowatt-hours beyond the 12 million they consumed. They sold the surplus, enough for an additional 200 homes, back to the national grid.

Freiamt is no hippie commune trying to shut itself off from the world. It's at the forefront of a growing and thoroughly modern trend. Whether to save the climate or save money—or a combination of both—homeowners, businesses and entire communities around the world are increasingly generating their own energy. From Tokyo, where homeowners have begun installing the first commercial fuel cells, to California's Million Solar Roofs program, to towns like Freiamt, the new word in energy is think small and go local.

The global electricity industry is still dominated by big, fossil-fuel-fired utilities, no question. They account for 67 percent of all electricity generation worldwide. And the International Energy Agency's World Energy Outlook, published in December, predicts in its "alternative scenario" that even if governments push energy and efficiency savings hard, big coal and gas power plants will provide half of all new generating capacity coming on line by 2030—and locally generated power will make up less than 20 percent. But other experts say the IEA projection could shift as massive new investment in energy research bears fruit and governments liberalize the energy markets that have so far favored centralized utilities. In 2006, locally generated "micropower" passed nuclear power in terms of total electricity generated, supplying 16 percent of the globe's power. Amory Lovins, founder of the Rocky Mountain Institute, estimates that one third of the generating capacity installed each year is local.

Some energy economists now foresee an "alternative alternative" scenario, in which governments break the hold that fossil-fueled utilities have on the market. Nikolaus Richter, networks specialist at Germany's Wuppertal Institute for Climate Research, says liberalized energy markets, combined with new technologies, could break the "carbon lock-in"—the preference for existing energy technology based on experience, legislation and vested interests. There's evidence that this state-sponsored revolution is underway.

Rising fuel costs and climate worries are making businesses and households think a lot harder about how they get their power. Governments are pushing the trend with subsidies and by opening up protected electricity markets that have so far favored the big utilities. In January, the European Commission made opening up power grids to locally produced energy one of several measures to boost the bloc's energy efficiency 20 percent by 2020. The vision of local communities generating their own power is also a crucial part of Sweden's ambitious program to wean the country off all oil and gas imports by 2020. In the past few years, more than three dozen countries, including Germany, Spain, Brazil and Indonesia, have created "feed-in tariffs"—guaranteed rates at which public utilities must buy power from wind, sun, waste or biomass from private citizens or local cooperatives.