Jeremy
Rifkin: "The Third Industrial Revolution"
Tuesday,
September 27, 2011 - 11:06 a.m. The Diane Rehm Show
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MS.
DIANE REHM
Jeremy
Rifkin argues we're missing the real threat to the world economy. He's a
best-selling author. He's advisor to the European Union on climate change, and
energy security. In a new book titled "The Third Industrial
Revolution," he says the global
economy will face more meltdowns followed
by shorter and weaker recoveries as
long as it relies on fossil fuels. He joins me in the studio to
describe a new economic development plan based on the merger of internet
technology and renewable energy.
MR.
JEREMY RIFKIN11:08:23
Nice
to be here, Diane, thank you.
You're
talking about the
democratization of energy. What do you mean?
We
have been living under two industrial revolutions, the first in the 19th
century, the second in the 20th century. And, you know, the great economic
changes in history as you said leading into the show occur when new energy revolutions converge with communication revolutions. When they
come together, it changes the whole way we live.
In
the 19th century, print technology became very cheap. We introduced
public schools. We created a mass workforce with the literacy skills to
organize the complexities of a coal and steam-powered revolution. In the 20th
century, the telephone was absolutely essential, and radio and television later
to become the communication medium to organize a very complex auto oil
and suburban age.
Those
two industrial revolutions provide us a little bit of a framework of the
problem we face now, and if I may, let me just spend a little moment on the
crisis.
We've missed the
real crisis
here. The real economic crisis occurred
in July 2008. When oil hit $147 a barrel that July, you remember
what happened.
Prices
went through the roof for every other product, pesticides, fertilizers,
construction materials, pharmaceutical products, synthetic fiber, power,
transport, heat and light, because our whole civilization is
either made out of and/or moved by fossil
fuel. So when the price of oil starts to go over 80 a barrel,
all the other prices go up on the supply chain, and at 147 a barrel in July
2008, people stopped buying.
The
prices were through the roof, and the whole engine of the global economy shut
down. What I'm suggesting, that was the economic earthquake. The
collapse of the financial market 60 days later, that was the aftershock.
We're
not going to the crisis. And the reason this is happening, Diane, and it's
really peaked globalization. At least in the business communication, we now
know the outer limits of how
far we can actually globalize this economy based on fossil fuels.
It's about 150 a
barrel and we'll hit the wall. The reason is something called peak
oil per capita, which is related to global peak oil production, but
a little bit different.
Peak
oil per capita
occurred in 1979, and there's no controversy about this. If we had distributed all the crude oil that
we had at that point to everyone alive on the earth, that's the most each
person could have if we shared it. Of
course, we found more oil since then, but population rose quicker. So if we
distributed all the oil we have to 6.8 billion people, there's simply less to
go around.
So
when China and India made a bid in the 1990s that at any 10, 12 percent
growth rate to bring a third of the human race into the game, the demand
pressure against the supply of crude oil was overwhelming, and we bottomed out
at 150 a barrel, and here's the proof this morning. You remember after the
crisis in 2008, the economy stopped and oil went down to $30 a barrel because
there was no economic activity.
In
2010,
we started to replenish inventory around the world. We started to grow again.
We tried to turn back the engine on and what happened? Oil shot
from 30 up to 100 a barrel.
It's
106, crude oil today, and what's happening? Once again, all the
prices are going up for everything else and purchasing power is plummeting
and the engine is shutting off again. So here's the message.
Every time we
try to regrow the economy at the same rate we were growing before July 2008, we
will see this terrible, terrible attempt to rejuvenate it, and within
three-year cycles, every
time we try to rejuvenate it, oil prices go up, all the other prices go
up, purchasing power goes down, we collapse.
So
we're in a very dangerous period over the next 30 years of growth and collapse,
growth and collapse. This is an end game, so we really need to address this and
figure out how we move to a new energy regime and new economic paradigm.
Again,
it's based on the premise that the great revolutions occur when communication
revolutions emerge to actually organize the complexity of new energy regimes.
You know we've had this very powerful Internet communication revolution, Diane,
in the last 15 years. And what's so interesting for me as an older person, is I
grew up on centralized
electricity communication top
down.
What's
interesting about the Internet is it's distributed and collaborative
in nature, and the power is lateral,
which sounds like an oxymoron, lateral power, but -- because we think of power
as pyramidical. But a later power suggests side by side power. What we're beginning to see in Europe in the
last 24 months is emerging of this very powerful communication medium, the
Internet, which is distributed in collaborative with a new energy regime,
renewable energies, which by nature are distributed in collaborative.
So
when distributed
Internet communication starts to organize distributed energies,
we have a very powerful third industrial revolution that could change
everything, and here are the five
pillars as we've laid them out. This is the formal plan of the European
Union. I was privileged to develop the plan, it was endorsed by the European
Parliament in 2007, Germany is leading by far in this plan, the leading
exporting power in the world, and here are the five pillars quickly.
Pillar one - the EU is
committed to 20 percent renewable energy by 2020. That's a mandate.
Every one of the 27 states has to fulfill that. That's a third of the electricity of Europe
has to be green by 2020. Pillar two, and this is
an interesting one, how do we collect these distributed renewable energies,
because the sun and the wind and the geothermal heat and the garbage and the
ocean tides and forestry waste, they're found everywhere.
You
can find some renewable energy in every square inch of the world. So how do we
collect them? This got us to pillar two, and our first idea in Europe was okay,
let's go to the Mediterranean, they've got a lot of sun. The Irish have the
wind, the Norwegians have the hydro, centralize it and put it in a high voltage
line and ship it out. Now, we're smiling now because we were thinking 20th
century energies which are centralized because they're only found in a few
places like coal, oil, gas, and uranium. Old ways of thinking
And
we began to ask a question two years -- no, four years ago, that seems
ridiculously simply now. If renewable energies are found in every square inch
of the world in some frequency or proportion, why would we only collect them in
a few central points?
Big
solar parks, big wind parks, geothermal parks. We don't oppose that. They're
essential, but not sufficient, and they're a small part of this third
industrial revolution. So pillar two lead us to buildings. The number one
user of energy in the world is buildings.
The number one cause of climate change is buildings. By the way, I should say,
Diane, I always feel I need to, the number two cause of climate change is beef production and consumption, and related animal
husbandry. Nobody mentions it. Number three is transport. So in EU, we have 191 million buildings
there. The goal is to convert every (building) single office, home,
and factory into your own micro power plant over
the next 30 years so that you collect the sun on the roof, the wind off the
side walls, the heat under the ground, et cetera.
But
who's going to pay for that?
Germany has an
interesting plan, because Germany is way ahead of the game here, and
pillar one they just reached last month, 20 percent renewable energy. Ten years ahead of time, and they're heading
to 35 percent renewable for electricity in nine more years.
Here's
the way they did it. They put in feed in tariff, which means you get premium --
if you convert your facility to renewable energy, and you want to sell your
energy back to the grid, you get a higher price than the normal energy. It's paid for in this way.
The
electricity bill is raised just slightly, so small you don't even notice it,
but then the money that's available is used for early adopters to put solar on
their roof or winds next to the building, et cetera.
And
so all over Germany, and now across Europe, buildings are being converted. The
new buildings, Diane, are actually positive
power. They create so much energy that they can use it and
surplus back to the grid. Olivia (word?) Construction has a beautiful office
complex in Paris, just went up next to the OECD headquarters. It's positive
power.
Pillar
two jump starts the European economy, that's the idea. Millions and millions
and millions of jobs. Thousands of small and
medium-sized enterprises have to convert 190 million buildings to power plants
over the next 40 years. So I think, Diane, the best way for the listeners to
think of it is, think mainframe computers 1970s, now you have
your own desktop. Think centralized
power in the 20th century, now you have your own power.
Pillar three, that's the
tough one, storage. The
sun isn't always shining in Germany, or in Europe, or here, and the wind isn't
always blowing when you need the electricity. These are intermittent energies,
so we have to store them. So the EU has committed to all the storage
technologies, batteries, flywheels, capacitors, water pumping, but we're
putting the big Euros into hydrogen.
Eight
billion Euro commitment of public/private funds in the next few years, because,
you know, hydrogen is the basic element of the universe. It's the stuff of the
stars. It carries other energy. It's modular so you can use it for small
homes and big factories. So here's how it works. You put photovoltaic solar
panels on your roof, you generate electricity.
If
you have some electricity you don't need for the moment, you put the
electricity in the water. Hydrogen bubbles out of the water into a tank. It's
real simple. When the sun isn't shining on your roof, you turn it and the
hydrogen goes from the tank back to electricity. A very small thermodynamic
loss.
All
right. Pillar one, renewable energy. Pillar two, your
buildings become your own power plants. Pillar three, you have to store
it with hydrogen. And then Pillar four, that's the
most interesting. This is where the internet communication revolution
completely merges with new distributing energies to create a
nervous system, an infrastructure for a new economic paradigm.
We
actually use off-the-shelf internet technology and convert the power lines of
the United States, Europe and the world, the transmissions lines into an energy
internet that acts exactly like the internet. So when millions and millions of
buildings are collecting their own green energy on site, storing it in hydrogen
like you store digital in media, if you don't need some of that electricity,
the software can connect you and you can share it across entire
continents. Just like we now produce our own information, store it in
digital and share it online.
And
it's interesting, in Germany, they have six test sites that have
been set up by the federal government and they are actually testing the most
interesting things. They're connecting every appliance -- every appliance to
the transmission central grid -- to the distributed grid. So we will know
what every washing machine is doing across an entire region, every thermostat,
every air conditioner. So if there's too much demand for energy and the price
is going up, the software can direct a million washing machines to say,
forget the extra rinse. If you, the consumer, bought that particular program
you'll get a credit and a check from the utility company.
They're
even testing weather conditions on the software so
each homeowner or business will know moment to moment the change in weather
conditions and how that would affect how they use their energy. And you'll have a dial that will tell you the
price of electricity moment to moment so that your software can tell you when
to get off the grid, sell back to the grid, et cetera. It's just beginning,
just beginning.
Pillar five is electric plug-in transport.
The electric vehicles came out this
year. Fuel cell hydrogen vehicles are coming out -- this is a done deal
-- in mass production by Daimler, General Motors and the other car companies in
2014. So you'll be able to plug your
vehicles in anywhere on the grid, get green electricity. Then
anywhere you travel, you can connect up to a plug, parking garages, whatever,
and either get green electricity from the grid or if your computer says sell
'cause the price is right, you can sell yours back.
So
Diane, these five pillars together is a -- they are a new technology platform.
They're the infrastructure we keep talking about in America. We keep saying we
need infrastructure, infrastructure. But the key is not to mend the old 20th
Century infrastructure alone because those energies and technologies are pretty
well exhausted, but to create the new infrastructure for a 21st Century third
industrial revolution.
What
happens to nuclear power in all of this?
I've
been advising the EU for a long time and the chancellor of Germany -- after
Fukushima, I got a call from the chancellor's office saying would I join
Chancellor Merkel in September to talk about how we grow a sustainable economy
in the 21st Century. And Germany is certainly leading in all these five
pillars.
I
think nuclear's -- it's really over. I
think Fukushima was just the last point of departure. I notice that this
week Siemens, the great German company, announced they're out of
nuclear power.
Let
me give you the business reason why it's over. And people can argue about the
ideological reasons. Nuclear was dead until the 19 -- in the 1980s
because of Three Mile Island and Chernobyl. It's come back
in the 1990s, was at -- least nuclear is clean. It doesn't emit CO2. It can play a role in averting climate change.
That was the whole rationale for its comeback.
(1),
The problem is this. There's about 400 nuclear power plants in the
world. They're very old. They only make up 6 percent of our energy mix,
that's all. But our scientific community says to have a minimum impact on
climate change, minimum, you'd have to have 20 percent nuclear in the
mix of energy. That means you'd have to have 4,000 nuclear power plants.
That means you have to replace the existing 400 and build three nuclear power
plants every 30 days for the next 60 years. That's not going to happen.
(2),
the second problem is we simply don't
know how to get rid of the nuclear waste.
I'm not going to spend a lot of time on
it, but we spent $8 billion to build that failsafe vault at Yuka Mountain to
put the nuclear material in. We can't open it up because it's already
leaking.
(3), Number three, uranium costs go up
right now with the existing power plants. We could recycle the uranium to
plutonium like the French want to do, but then we've got problems with security
issues around the world.
(4), And here's the final thing your listeners
should know. We don't have the water. Forty percent of all the water consumed in
France last year went to cooling nuclear reactors. And when it comes back, the water's heated and
it's dehydrating eco systems for agriculture. So from a business point of view, I'd be
surprised if we build more than 50 nuclear power plants. I think the old ones
are going to go. I just don't think it's part of the equation.
All
right. So in the midst of all this planning for the future you have oil companies and gas companies pushing for new
exploration. What do you say to them?
It's
kind of sad. In the opening chapter of the "Third Industrial
Revolution" I quote a petroleum institute study because, you know, former
vice-presidential candidate Sarah Palin and others are saying drill, drill,
drill as if that's going to get us out of the crisis.
the
petroleum institute did a study and showed that if we opened up every
potential oil reservoir that we have, the Arctic, the Gulf of Mexico, the
Rocky Mountains, the east and west coast to complete drilling, and this is the
petroleum institute that represents the industry, we might be able to get 10
percent more oil out of the ground. That's infinitesimal in 20 years from
now in a global aggregated market. So...
And
what about gas fracking?
Gas
fracking is problematic, too. Of course, remember, there's CO2 emissions
there. Secondly, there is a lot of potential
gas, but the environmental consequences are potentially enormous. That's why France, which is very, very
fastidious about its power, has outlawed fracking already. And there's a big
global discussion going with it.
You
know, Diane, there's lots of other fossil fuels.
We have tar sands from Canada.
And the government here in Washington has to decide whether that pipeline
should send that tar sand down to Houston. We have heavy oil in Venezuela. We have coal deposits around the world, but
they're dirtier. They emit more CO2. They bring us into climate change even
quicker. So we're trapped.
On
the one hand, we have a dying fossil fuel second industrial revolution. And
every time we try to re-grow it, it's going to collapse because of the price of
oil. On the other hand, we have the entropy bill for the industrial
aid, the CO2 we put into the atmosphere, which is now affecting agriculture and
infrastructure. So we're stuck with
this, but we have to find a way to make sure the old system doesn't collapse,
keep it on life support. But we have to vest our funds, our knowhow, our talent
into laying down this five-pillar infrastructure for a third industrial
revolution to grow millions of jobs, create a new business model and make it
sustainable.
But
you've got lobbyists, members of congress all locked in to that second
industrial revolution with fossil fuels as its basis.
That's
true and the energy industry's a very powerful lobby in Washington. They
received, even today in their sunset period, they're receiving tens of billions
of dollars of subsidies every year. But you know what? I think we have a
more powerful lobby here, not in the traditional sense. But when you take a look at these five pillars
the industries that are represented are pretty impressive. It's the renewable
energy industry. But the construction industry, the real estate industry, the
IT industry, the logistics and transport industries.
And
so when we begin to look at the possibilities of taking a stagnant American
economy and laying down this new infrastructure, we're talking about thousands
of new businesses and millions of new jobs to lay down the infrastructure
itself. And it starts immediately. As soon as you commit yourself to this
revolution in each city, in each state and begin to create public private
partnerships to do this, the jobs start right away at day one.
So
we hear President Obama talking about the
prospect of a green economy and how it could create new business and jobs. So why are you critical of his efforts?
we
looked at him as a transitional president to a new generation, the internet
president. And he said the worst thing is losing his Blackberry. So I assumed
when he came into office that he would understand the potential of joining
internet communication to organize distributed renewable energy.
The
problem with the Obama Administration is not the will. They do
want to have a green economy. And to be fair, this administration has spent
billions and billions of dollars in introducing various technologies and
initiatives. But he
doesn't have a narrative. He doesn't have a game plan. There isn't a
coherent cohesive roadmap on how you do this.
So
when he introduces his green economy, it's all a hodgepodge of individual
projects that seemingly don't tie in, a battery factory over here,
an electric car over here, a solar factory over there. And what he hasn't done
is put these disparate parts into a comprehensive story that tells us about a
third industrial revolution. He doesn't have these five pillars. And if you
don't put them together, Diane, you can't create the new economic paradigm
we're talking about.
If
you've been meeting with Angela Merkel, why haven't
you met with President Obama?
Well,
that's a good question. In the book, there's a little chapter there in my
discussions early on with some members of the congress over the years. And
certainly they're aware of what we're doing in the European Union. But it
hasn't blown back here in any significant way. But I think it's
going to open up really in a major way in the next 24 months. You're going to
see developments in Texas, California's already moving along, and northeast and
other parts of the country.
Let
me give you one example. When we first introduced this into Europe, the power and utility companies weren't very
thrilled because they're kind of attached to the big energy companies. And
they're saying, well, wait a minute. We're going to have to give up
controlling energy and sell less electrons? This doesn't make sense.
Then we began to introduce a new business model to the power and utility
companies on how they make more money in shifting to this third industrial
revolution.
I
said,
get used to it. In the future, millions of people in homes, offices and
factories are going to produce their own energy. The new technology, solar,
wind, geothermal, they're getting cheaper and cheaper. And they're going to
follow the same line that the cell phones and computers did, going from very
expensive to so cheap you can give them away. And once that technology
becomes cheaper and cheaper to collect the energies -- the energies
themselves are free, Diane. It's the wind, the sun, the heat under your
ground, the garbage you collect, so in the future, millions of people are going
to really provide their own energy.
What's
the role of the utility companies? They'll be able to run the energy internets, 'cause
that's technical. And the way they're going to make money is they're going to
do the IBM shuffle. You remember IBM was in trouble in the '90s.
They were making no money selling computers. So they decided that they had to rethink their
business. And they came up with the idea that their real business is managing
information. So now every company in
the world has a chief information officer.
The
power and utility companies' new business is to set up relationships with
thousands of corporate clients and homeowners to manage their energy flows, to
keep their energy costs down and their productivity up. And here's the key for
anyone in the business community listening to this. The key to survival in
the next 30 years is not labor costs, it's energy costs
to the extent that any business can keep its energy costs low, its productivity
high and its margins there it survives. And the utility company can share those
savings with the companies.
Diane,
I think there's a generational problem here. The old guard in the
business community, they think centralize, they think top down.
The young generation in the business community and in the public thinks distributive
and collaborative and lateral. The
music companies, they didn't understand distributed file sharing of music. They
didn't understand it and then they went down in five years. They just tumbled.
And the newspapers didn't understand the distributed computing power of a
blogosphere. And now newspapers are hurriedly trying to create blogs.
But
when the internet connects with energies and we create a democratization of
energy, it's 100 times more powerful. Because then it means we begin to create
all sorts of new business models and new ways of relating to each other.
The
key is, how you get the loans. How do you finance getting a $30,000
photovoltaic on your roof? The way they do it in Europe is green loans.
It's now starting in Italy and Germany. Now Italy has its problems with
bureaucracy, so listen to this one, Diane. There are companies in Italy who
have lined up the big national banks. You, a homeowner, can go and get a green
loan. You sign a paper.
Sixty
days later, the photovoltaic power plant's on your roof. Sixty days later. And
the reason the banks are willing to finance this, because of the feed-in
tariff, they know you're gonna save electricity on your bill and you're going
to be able to pay as you say. And so they automatically know you're a good
risk. In Germany they're starting green loans. In North America, only Ontario
has the feed-in tariff.
