Power Market Design
Jeremy Rifkin:
Energizing the Third
Industrial
Revolution
After a century of centralized, one-way power supply,
energy markets today are buffeted by volatile prices
and competition from renewables. Living Energy met
best-selling author and EU advisor Jeremy Rifkin
for an exclusive interview at his office in Maryland
about changes in the global power market and the
“energy internet.”
Text: Justin Gerdes
Photos: Tyrone Turner
Living Energy · No. 8 | July 2013
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Power Market Design
Author, social theorist, political advisor: Jeremy Rifkin heads the Foundation on Economic Trends.
L
iving Energy: The USA is coming out of an economic collapse; Europe is still mired in
recovery. While fossil fuels will
likely remain part of our energy
supply for the foreseeable future,
experts are already looking at
cheaper alternatives that may take
their place in the long run. How
does the economic crisis shape the
global transformation of the energy market?
Jeremy Rifkin: They are completely
interrelated. We’ve had two events in
the last five years that signal the end
of the industrial age based on fossil
fuels: In July 2008, crude oil hit a peak
of US$147 a barrel on world markets.
Prices across the global supply chain
went through the roof because everything in this civilization is made of
and/or moved by fossil fuels. In that
month, the entire economic engine of
the industrial revolution shut down.
That was the economic earthquake;
the collapse of the financial markets
60 days later was the aftershock.
Most of our world leaders as well as
businesspeople and economists are
still dealing with the aftershock; we
haven’t gotten to the earthquake yet.
We are in four-, five-, and six-year
cycles of growth, slowdown, growth,
and slowdown because the fossil fuel
energy age is ending over the next
25 years.
10 Living Energy · No. 8 | July 2013
This leads us to the second event of
the last five years – the Copenhagen
climate change talks of December
2009. The leaders of 192 countries
went to Copenhagen to address the
carbon bill for the industrial age. We
spewed massive CO2 into the atmosphere during the 19th and 20th centuries, with the First and Second Industrial Revolutions. We’re not grasping
the enormity of this moment. It’s
not just an economic crisis; the economic crisis has now given rise to a
species crisis.
This is a pivotal century where we
have to make some very quick and determined decisions to move us away
from carbon-based fuels and into a
renewable energy future. And we
have to do it in a way that will get us
there in time.
LE: Can you describe some of the
decisions that will be required?
JR: We need an economic game plan
that is deliverable, and it has to move
as quickly in emerging nations as in
industrialized countries. We have to
be off carbon in 30 years – off. When
we look at history, the great economic
revolutions occur when new energy
regimes emerge. New energy regimes
make possible more complex civilizations. But the complexity then requires new communication revolutions that are agile enough to manage
the new energy regimes.
What’s happening now in Europe is
that the distributed, collaborative,
laterally scaled communication revolution of the internet is beginning to
merge with a new energy regime: distributed energies, which have to be
organized collaboratively and scaled
to peer-to-peer lateral power. It’s a
perfect match of communication and
energy.
LE: Your recent book, The Third Industrial Revolution, describes five
pillars that will be the foundation
for the new energy economy. What
are those five pillars?
JR: Pillar one: The EU has made a formal commitment to achieve a 20 percent share of renewables in its energy
use by 2020. That’s not a suggestion;
that’s a mandate.
Pillar two: How do we collect energies
that are distributed – the sun, the
wind, geothermal heat, waves, and
tides? If distributed energies are everywhere, why don’t we collect them
everywhere? We collect them wherever there are buildings. In the EU,
we have 191 million buildings, homes,
offices, factories. The goal is to convert every single building in the EU
to your own personal green micro
power plant. New buildings will be
legislated as zero-emission and positive-power structures. Pillar two is
what jump-starts the European economy.
Rifkin’s views have been embraced by the United Nations Industrial Development Organization (UNIDO)
and the European Commission, among others.
Pillar three: This is a challenging pillar – storage. At the EU level, we are
committed to all storage; we have no
preferences for flywheels, batteries,
compactors, air compression, or water pumping. But in our planning, we
have focused the center of the storage
network on hydrogen, because it’s
the basic element of the universe. It
carries other energies, and it’s modular. The EU has committed €8 billion
to a public-private deployment of
hydrogen storage technology.
Pillar four: This is where the internet
communication revolution converges
with the new distributed renewable
energies. It’s the nervous system for
this new economic paradigm. If you
don’t need electricity at any given
time in your building, you can program software to sell that electricity
across a distributed smart grid: an
“energy internet” that extends from
Ireland all the way to the borders of
Russia, just as we now create and
store digital information and share
it online.
Pillar five: The last pillar is shifting
transport and logistics to electric vehicles. The five major global auto
companies will roll out fuel cell cars,
trucks, and buses running on hydrogen in 2015 and 2016. We will build
the infrastructure for electric cars to
plug into green electricity everywhere, including every parking
space. While your car is parked, if the
price of electricity goes up on that
grid, your software can direct your
car to sell some of your electricity
back to the grid.
u
Prophet of Transformation
Everybody agrees that energy markets are an essential element of modern
societies. But that is where agreement ends; when it comes to the design
and shaping of these markets, opinions vary considerably. Jeremy Rifkin,
economist and political advisor to several heads of state, is the author of
The Third Industrial Revolution. In his book, he predicts that the transformation of power sectors worldwide will bring the opportunity to achieve a
transition, by the middle of the century, from the centralized fossil-based
energy systems of the 20th century to innovative peer-to-peer energy supply
ultimately based on renewable sources. This revolution, he argues, will not
only help avert a climate catastrophe, but also offers new business opportunities for ailing developed economies over the coming decades.
Living Energy · No. 8 | July 2013
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Power Market Design
Power Market Design
Jeremy Rifkin
“The economic crisis
has now given rise to
a species crisis.”
Born on
January 26, 1945
in Denver, Colorado
Background
Founder and President of the
Foundation on Economic Trends
Education: BS in Economics,
Wharton School at the University of
Pennsylvania (1967); MA in International Affairs, Fletcher School of
Law and Diplomacy at Tufts University (1968).
Has advised the EU for the past decade. Consultant to the governments
of Germany, France, Portugal, and
Slovenia during their European
Council Presidencies on economy,
climate change, and energy security.
The Third Industrial Revolution
framework was formally endorsed
by the European Parliament in 2007.
Rifkin’s global economic development team is the largest of its kind
in the world, advising cities, regions,
and national governments on the
development of master plans to
implement postcarbon infrastructures.
Author of numerous books on many issues including US and
global economics, the environment, biotechnology, and energy.
His best-selling book The Third Industrial Revolution,
which has popularized the idea of “lateral power,”
had sold 100,000 copies in China alone as of 2013.
The app version of Living Energy
features a film of our interview with
Jeremy Rifkin.
Living Energy at
12 Living Energy · No. 8 | July 2013
These five pillars alone are components. It’s only when we connect
them and phase them in that we create a general-purpose technology
platform. We do not need to repeat
the mistake made here in the USA.
President Barack Obama wanted a
green economy; he still does, and his
heart is in it. But we spent billions
and billions of US dollars in stimulus
money and still don’t have a green
economy. Why? Because the money
was spent on siloed stand-alone piloted projects.
When a community, let’s say a region
in Germany, starts to build this fivepillar infrastructure, it immediately
has to look for other nodes. If it has
a surplus of green electricity due to
strong sunshine or high winds, it
wants to sell it to some other zone in
other parts of Europe. This energy
internet favors large continental
regions that can share surpluses
against lulls because of different
times of the day, seasonal differences,
climatic differences. The energy internet runs across land masses, like
Wi-Fi, until it reaches the ocean’s
edge. The next stage of globalization
is continentalization. We need networked political unions that can create the codes, regulations, standards,
and interoperability.
LE: What do big, centralized power
producers in the USA and Europe
think about that? Even though the
transitioning won’t happen overnight, they face major challenges –
rapid deployment of distributed
generation and falling profits because of plunging wholesale prices.
JR: The energy companies have not
been overly happy with this, but
some of them are moving in our direction. They realize they have to be
in two portfolios. We aren’t leaving
centralized energy tomorrow morning; we have a whole infrastructure
out there. We have to manage that
existing centralized model of fossil
fuels and nuclear power by reducing
CO2 and increasing efficiency. At the
same time, the energy companies
would be well served by also being
invested in the new model of distributed and collaborative use of renewable energies, laterally scaled.
The real test for any company is to
operate in both business models at
the same time, so that we carefully
wean ourselves off the old centralized
model over the next 25 years while
quickly and efficiently entering the
new laterally scaled model of the
Third Industrial Revolution.
LE: Do you think all parts of the
corporate sector will succeed in
transitioning to the new model
over the next few decades of this
changeover period?
JR: Some energy companies won’t
make it; they’re just not going to buy
it. When we first introduced this idea
of distributed power to the transmission and utility companies, they
weren’t happy. They said: “We would
like to sell a lot of electricity. End of
story.” But the EU went through an
unbundling process, and the European Commission decided that you
couldn’t own both the power generation infrastructure and the transmission lines. We now have millions of
people providing a little bit of their
own green electricity.
The job of transmission companies
will increasingly be to take the energy of millions and millions of players
into the grid. They will run the energy internet and set up partnerships
with thousands and thousands of
small and medium-size enterprises
as well as large global companies,
managing their energy like IBM, Cisco, and HP manage their information. Then the clients can share their
productivity gains back with the utility companies. There’s far more money to be made in selling less electricity, managing that electricity flow,
reducing the energy costs of clients,
and sharing the productivity gains.
Everybody wins.
Jeremy Rifkin met Living Energy correspondent Justin Gerdes for an
exclusive interview at his office in Bethesda, Maryland.
LE: It’s obvious that in the EU at
least, the Third Industrial Revolution, the energy internet, has
buy-in from political and business
leaders. How do you get political
support from the leaders in the
USA?
JR: Once other nations begin to lead
the way, the USA will follow. US policy
makers and business leaders will
eventually learn that this is the best
model, and once they do, the USA will
be poised to adopt it quickly because
of all of its assets. The EU has embraced this Third Industrial Revolution, and China is having a robust
discussion about it. China realizes
that Britain led the First Industrial
Revolution with coal and the USA led
the Second Industrial Revolution with
the Texas oil wells and the automobile culture. China has a great opportunity to be among the leaders in a
Third Industrial Revolution. Like every other country, they are wrestling
with the concept of being invested in
two portfolios simultaneously – the
centralized power of the 20th century
and the distributed power of the 21st.
They have to find that balance of how
to keep that old system as efficient as
possible while moving to the new.
But I have no doubt that in 2050, we
won’t be surrounded by old-fashioned nuclear coal and gas power
plants. These plants are inconsequential once millions and millions and
millions of players are producing tiny
amounts of green electricity. What we
are realizing is that in developing
countries, their liability is their asset.
They can move with virgin infrastructure, lay down microgrids, and then
start to connect them in a lateral way.
That’s been happening in the last 12
months, all over sub-Sahara Africa
and rural India. p
Justin Gerdes is an independent journalist
specializing in energy and climate change
based in the San Francisco Bay Area. His work
has appeared at Forbes.com, the Guardian,
Yale Environment 360, GreenBiz.com, and
MotherJones.com, among others.
Living Energy · No. 8 | July 2013
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