We've seen a significant shift in how we consume and produce electricity over the last decade. Original methods of centralized energy generation from oil, gas, coal, and nuclear power plants are quickly becoming a thing of the past. The renewable energy movement is not only providing environmentally friendly and cost-effective solutions for the energy market, but it is also (quite literally) transferring power into the hands of individuals and businesses. However, you may be wondering what the distinction between centralized and decentralized energy is, the causes of this shift, and who benefits from it.

When the market's electricity needs rely on major producers such as oil, gas, coal, and nuclear power plants, this is referred to as centralized energy. One of the issues with the centralized model is that it relies on a steady supply of natural resources, and these natural resources fluctuate in price continuously, making electricity costs unpredictable and expensive to consumers and businesses. Another issue is that in the event of a major disaster, whether a natural, economic, or military one, if major centralized facilities are affected, consumers and businesses may not be able to meet their electricity needs or may have no electricity at all. Decentralized energy reflects on these issues and provides a much-needed solution.

Decentralized energy is when electric outputs are pooled into the grid from nearby renewable sources such as solar, wind, or hydroelectric dams. These sources come from community fields or from residential, commercial, or industrial properties. Decentralized energy is a viable option because it allows electricity to become more individualized, with businesses and residential properties relying on electricity from local sources rather than a central power plant. This model exists merely because of a shift in focus towards energy security. Added on to this, businesses and residential properties can also still produce and consume electricity in the event of a major disaster.

The transition from centralized to decentralized energy began about a decade ago when local and national governments set ambitious renewable energy objectives. These objectives paved the way for new legislation and various federal, state, and local incentive programs. Simultaneously, innovations and advancements in energy technology have made renewables such as wind and solar easier and less expensive to install. In fact, solar is now the cheapest form of electricity on the market as of 2020.

The emerging decentralized shift benefits investors, utilities, consumers, and the entire energy sector in general. Unless you had a lot of capital upfront, the energy sector was thought to be challenging to invest in. The decentralized energy model enables investors and consumers to invest in renewable energy companies, produce their own electricity (prosumer), or purchase electricity at prices lower than central producers. With this model, almost anyone can participate in the evolving energy market.