Jeremy Rifkin Envisions An 'Energy Internet' With Thousands Of Small Producers

On Monday, we posed a few questions to Jeremy Rifkin, the American economist and president of the Foundation on Economic Trends, whose new book, "The Third Industrial Revolution," argues that a titanic economic and political shift is under way -- one driven in large part by the rise of clean, decentralized energy sources.

Below is part two of that conversation, which coincides with a second excerpt of Rifkin's analysis, available here.

With widespread unemployment and a lingering economic recession, many politicians argue that dramatic departures from the status quo would be too risky. Often they call for more drilling and excavation of fossil fuels as a way to jump-start their economies. What's your response to this in light of the Third Industrial Revolution?

Former Republican vice presidential candidate Sarah Palin's now-famous exhortation, "Drill, baby, drill," though ridiculed by environmentalists, is echoed by a majority of Americans. Even President Obama, the so-called green president, called for a lifting of the longstanding moratorium against deep-water offshore oil drilling along the southeast Atlantic coast just weeks before the BP oil spill.

Palin and Obama should know better. These potentially dangerous oil drilling expeditions in remote terrains yield an insignificant amount of oil at best. Consider, for example, the hotly contested question of whether the U.S. government should open part of the [Arctic] National Wildlife Refuge, the East and West coasts, the eastern Gulf of Mexico and the Rocky Mountains to oil drilling. According to a 2011 study commissioned by the American Petroleum Institute, which represents all of the leading oil and gas companies, drilling in every possible place in the United States where there are still remaining oil reserves would add only two million barrels per day by 2030, or less than 10 percent of current U.S. consumption -- all in all, a marginal increase in production with little appreciable impact on forestalling the end of the oil era.

Many people have simply not come to grips with the fact that the fossil fuel–driven Industrial Age is sunsetting. This doesn't mean that the oil spigot will suddenly run dry tomorrow. Oil will continue to flow but at dwindling rates and higher costs. And because oil is aggregated and priced in a single world market, there is no magic formula by which any particular country can isolate itself under the banner of "energy independence." As for conventional natural gas, the global production curve roughly shadows that of oil.

Millions of Americans are justifiably frightened and angry about what is happening in America. They are not alone. Families all over the world are scared as well. Drilling for more oil, however, won't get us out of the crisis because oil is the crisis. The reality is that the oil-based Second Industrial Revolution is aging and will never rebound to its former glory. And everywhere people are asking, "What do we do?" If we are to put people back to work, curtail climate change and save civilization from ruin, we will need to transform our energy regime, create a compelling new economic vision for the world and establish a pragmatic game plan to implement it.

Corporate influence over not just American but global politics is stronger now than ever before. But the sort of capitalism you envision would seem to disfavor large, centralized corporations -- particularly those whose business models depend on continued use of fossil fuels. How does this revolution come about when these players hold such sway in the halls of power?

The fossil fuel energy lobby in the United States is so powerful a force that it has managed to secure tens of billions of dollars in government subsidies over the past 25 years. It has also fought the introduction of renewable energy into the electricity mix for decades. And in the few instances where big oil companies have entered the renewable energy market, they have followed the traditional route of centralizing production and feeding the electricity into a unidirectional power grid.

While still the most powerful lobbying force in Washington, the old energy lobby -- and the Second Industrial Revolution industries surrounding it -- may be on its last legs. What hasn't yet happened, however, to any significant degree is the coming together of a powerful renewable energy lobby with the accompanying industries that make up the five-pillar infrastructure of a Third Industrial Revolution. If the renewable energy industry, the construction and real estate sectors, the IT industry, the power and utility companies, and the nation's transport sector were to join forces and mobilize public support and government assistance behind a long-term plan to build a Third Industrial Revolution infrastructure, we could turn this country around, regrow the economy and create millions of new jobs virtually overnight.

A distributed and collaborative [Third Industrial Revolution] network needs to model its lobbying efforts to comport with its mission to create a transparent, democratic, sustainable and just world. Paying knowledgeable lobbyists to make the case in the statehouses, Congress and the executive agencies for a Third Industrial Revolution vision and game plan should be encouraged. Financing election campaigns and rewarding government personnel with private sector jobs in return for their support should be strictly prohibited.

Along the same lines, you envision millions of consumers becoming power generators, subverting the current system, which favors large, centralized, utility-scale energy production. But utilities in many jurisdictions, fearing revenue loss, have resisted this or placed limits on how much energy can be fed into the grid. How does the transition you envision break the grip of current stakeholders like this?

A sea change is taking place in European power and utility companies -- something not yet shared by their American counterparts. Intense discussions are taking place inside the corporate suites. These companies have been, for more than a century, attached at the hips to giant energy companies, whom they rely on for the fossil fuels to generate electricity.

Now, however, a younger generation of executives, noticing a heightened interest from local municipalities, regions, small- and medium-sized enterprises, cooperatives and homeowners in producing their own renewable electricity on micro-grids, see an opportunity to recast the role of their companies. They envision power and utility companies adding a new function and, with it, a new business model to accompany their traditional role as suppliers of energy and managers of transmission and distribution. Why not use intelligent utility networks to better manage the existing flow of electrons coming from centralized fossil fuels and uranium fuel, while also using the distributed capability of the new smart grids to collect and transmit electrons coming in from thousands of on-site micro-grids? In other words, go from a unidirectional to a bidirectional management for generating renewable electricity and from dependence on centralized fossil fuels to reliance on distributive green energy.

In the new scenario, the companies would give up some of their traditional top-down control over both supply and transmission of electricity to become, at least partially, an integral part of an electricity network involving thousands of small energy producers. In the new scheme, the utility company becomes the manager of the energy Internet. It moves increasingly away from selling its own energy to becoming a service provider, using its expertise to manage other people's energy.

What clients really want from power and utility companies is advice on how to implement energy systems that are more efficient and use less energy. In a highly competitive world where energy costs are now eclipsing labor costs in some industries, the name of the game is energy savings -- it's one of the few areas in which substantial gains can keep margins from shrinking and even collapsing altogether. By this new reasoning, utilities in the future will co-manage companies' use of energy across their entire value chain, just as IT companies like IBM help businesses manage their information. The potential new business opportunities would eventually dwarf their conventional business of simply selling electrons.

As part of the Third Industrial Revolution, you describe a reorientation of society's relationship with nature. Can you give a snapshot of what you mean by this?

The scientific community's recent insights into the workings of the Earth's biosphere amount to nothing less than a rediscovery of the planet we inhabit. From diverse fields -- physics, chemistry, biology, ecology, geology and meteorology -- researchers are beginning to think of the biosphere as operating like a living organism, whose various chemical flows and biological systems are continuously interacting with one another in a myriad of subtle feedback loops that allow life to flourish on this tiny oasis in the universe.