Living Energy · No. 8 | July 2013 9

Power Market Design

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

Jeremy Rifkin:

Energizing the Third

IndustrialRevolution

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Power Market Design

iving Energy: The USA is com-ing out of an economic col-lapse; 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 ener-gy 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 every-thing 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.

What’s happening now in Europe is that the distributed, collaborative, laterally scaled communication revo-lution of the internet is beginning to merge with a new energy regime: dis-tributed 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 In-dustrial 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 for-mal commitment to achieve a 20 per-cent 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 ev-erywhere, why don’t we collect them everywhere? We collect them wher-ever there are buildings. In the EU, we have 191 million buildings, homes, offices, factories. The goal is to con-vert every single building in the EU to your own personal green micro power plant. New buildings will be legislated as zero-emission and posi-tive-power structures. Pillar two is what jump-starts the European econ-omy.

Pillar three: This is a challenging pil-lar – storage. At the EU level, we are committed to all storage; we have no preferences for flywheels, batteries, compactors, air compression, or wa-ter 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 modu-lar. 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 pro-gram 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

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 atmo-sphere during the 19th and 20th centu-ries, with the First and Second Indus-trial Revolutions. We’re not grasping the enormity of this moment. It’s not just an economic crisis; the eco-nomic crisis has now given rise to a species crisis. This is a pivotal century where we have to make some very quick and de-termined 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 civiliza-tions. But the complexity then re-quires new communication revolu-tions that are agile enough to manage the new energy regimes.

Rifkin’s views have been embraced by the United Nations Industrial Development Organization (UNIDO) and the European Commission, among others.

Author, social theorist, political advisor: Jeremy Rifkin heads the Foundation on Economic Trends.

store digital information and share it online. Pillar five: The last pillar is shifting transport and logistics to electric ve-hicles. The five major global auto companies will roll out fuel cell cars, trucks, and buses running on hydro-gen in 2015 and 2016. We will build

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 transfor-mation 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 oppor-tunities for ailing developed economies over the coming decades.

the infrastructure for electric cars to plug into green electricity every-where, 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

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These five pillars alone are compo-nents. It’s only when we connect them and phase them in that we cre-ate 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 pilot-ed projects.When a community, let’s say a region in Germany, starts to build this five-pillar 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 in-ternet runs across land masses, like Wi-Fi, until it reaches the ocean’s edge. The next stage of globalization is continentalization. We need net-worked political unions that can cre-ate 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 over-night, they face major challenges – rapid deployment of distributed generation and falling profits be-cause of plunging wholesale prices.JR: The energy companies have not been overly happy with this, but some of them are moving in our di-rection. They realize they have to be in two portfolios. We aren’t leaving centralized energy tomorrow morn-ing; 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 distrib-uted and collaborative use of renew-able 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 transmis-sion 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 Europe-an Commission decided that you couldn’t own both the power genera-tion infrastructure and the transmis-sion 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 ener-gy of millions and millions of players into the grid. They will run the ener-gy 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, Cis-co, and HP manage their informa-tion. Then the clients can share their productivity gains back with the util-ity companies. There’s far more mon-ey to be made in selling less electrici-ty, managing that electricity flow, reducing the energy costs of clients, and sharing the productivity gains. Everybody wins.

LE: It’s obvious that in the EU at least, the Third Industrial Revolu-tion, 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 em-braced this Third Industrial Revolu-tion, 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 automo-bile culture. China has a great oppor-tunity to be among the leaders in a Third Industrial Revolution. Like ev-ery 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-fash-ioned nuclear coal and gas power plants. These plants are inconsequen-tial 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 infrastruc-ture, 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 at

Jeremy Rifkin met Living Energy correspondent Justin Gerdes for an exclusive interview at his office in Bethesda, Maryland.

Born on

January 26, 1945in Denver, Colorado

BackgroundFounder and President of the Foundation on Economic TrendsEducation: BS in Economics, Wharton School at the University of Pennsylvania (1967); MA in Inter-national Affairs, Fletcher School of Law and Diplomacy at Tufts Univer-sity (1968).

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.

Has advised the EU for the past de-cade. 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 develop-ment team is the largest of its kind in the world, advising cities, regions, and national governments on the d evelopment of master plans to implement postcarbon infrastruc-tures.

Jeremy Rifkin

“The economic crisis has now given rise to a species crisis.”

The app version of Living Energy features a film of our interview with Jeremy Rifkin.