The Electrostate Revolution Part 1 - A Short Primer on Energy Economics

The world is currently gripped in what may be the worst energy crisis in modern history so far. Trump’s war with Iran, the closure of the Strait of Hormuz, and increasingly expensive, less available, and erratic oil supplies have been sending shockwaves through the economy. As the crisis has escalated, the conversation has turned to renewable energy and whether its time has truly come. Though this immediate crisis has created a potential breakthrough moment for green power, that this shift is even possible is thanks to the emergence of an entirely new way of doing energy economics.

This new system is what energy researchers are increasingly calling the electrostate. Electrostates are societies whose economies derive their energy from primarily renewable energy sources, ensure reliability using battery systems, and are currently transitioning their economic systems away from fossil fuel based technology and machinery in favor of battery-driven, all-electric systems. Electrostates, thanks to the greater reliability of renewable systems, their comparative immunity to the price shocks that have long plagued fossil fuel energy, and their overall greater efficiency, would potentially be more economically stable compared to petrostates.

When you frame the rise of the electrostate in such terms, it sounds like a wonky bit of economic jargon. When you translate it into practical terms, what you discover is the rising electrostates of the world are the vanguard of one of the most profound transformations of modern society since the days of the steam engine. The advantages electrostates are already known to enjoy and their potential economic multipliers mean that, in short order, electrostate economies will economically outpace any society who remains dependent on fossil fuels and dominate the markets of the future. Such prospects may, and potentially already are, lead to new points of friction in our rapidly changing times.

This essay series will lay out the challenges, opportunities, and options presented by the growing electrostate revolution. It will begin by exploring the state of energy and how it impacts our economy. It will then describe why the future is electric and how renewable energy and battery tech are unleashing an epochal shift in how energy and economics work. It will then raise the question best articulated by economic historian Adam Tooze and suggested by participants at the World Economic Forum: will the rising electro-states find themselves locked in a new Cold War with old, declining petro-states like Russia, Saudi Arabia, and a Trumpian America or are recent events the beginning of carbon energy’s last stand. It will then conclude by discussing where the world will go and how we can ensure the electrostate future is truly realized.

Without further adieu, it is time to jump into the world of energy economics. Energy, generally speaking, has been one of the big constraints on economic activity throughout human history. That energy could, and in most cases has been, fire or human and animal labor applied to change our surroundings. These early forms of energy were supplemented by early wind and water power, in the form of mills for activities like grinding grain into flour, and could be enhanced by increasingly sophisticated tools which, ultimately, were limited by the constraints of biological labor. It’s not for nothing that horsepower is still used as the unit for measuring the energy output of devices like locomotive and automobile engines.

This changed with the invention of the Newcomen steam engine in 1712 and James Watt’s 1776 improvements which took it out of the mining shaft and onto the factory floor. Humanity, for the first time, had a means of producing usable energy which was comparable to teams and, eventually, herds of horses and could be used for an increasingly diverse range of tasks. The steam engine’s reliance on coal, as a compact and relatively easy to harness source of power, also initiated our species’ very messy relationship with fossil fuels.

Central to that relationship has been an unstable dynamic of boom and bust. From the moment the first coal mines and oil wells opened, the fortunes of everyone economically drownstream of these operations became entwined in the fates of fossil fuels. Times of plentiful, reliable supply, like those enjoyed by the US in the 1950s and 1960s, saw prolonged, reliable economic growth and prosperity. These times of energy plenty faltered and fractured when the Oil Shocks of 1973 and 1979 sent the price of oil skyrocketing, drove persistent inflation, and upended global finance.1 These shocks were the beginning of a prolonged, post-World War 2 trend of where every economic recession since, with the exception of the COVID-19 shock, was preceded by skyrocketing oil prices.

What this dynamic shows is the energy economics of petroleum are defined by swings in supply and demand which have substantial consequences for the rest of our fossil fuel-dependent economy. What makes matters worse is the ownership and production of fossil fuel resources is highly lucrative and heavily concentrated in a small number of hands. That wealth also assumes all discovered and extractable fossil fuels will, eventually, be dug, drilled, or otherwise disgorged from the earth and sold regardless of any consequences this may have for the rest of us. It is a state of affairs which is inherently undemocratic & is encouraged by the petro-actors’ own proclivities towards oligarchy & authoritarian politics.

Renewable energy and the rising electro-states they've made possible, by contrast, operate on a different economic logic which is far more stable, efficient in allocation of resources, and enjoys significantly cheaper costs of production. These advantages mean electro-states, will enjoy greater energy resilience, reduced material waste, and more prosperous economies. The fall of the carbon oligarchs which would follow could also open the door for a more democratic approach to energy, economics, and society. Why this is the case is essential for understanding the potential this energy revolution offers for transforming modern society.