In some ways the quest to transition off fossil fuels is a race for the future. A race that the United States is losing. (It wasn't the fallout of Cali's Solyndra so much as China's $30 billion injection of domestic solar subsidies that has rattled U.S. renewables.) Yet in other ways it's a dance. To make solar and wind work as a baseload power source that can replace coal, we need some way of storing and using that power over long periods of time. To make electric cars feasible, we need to be able to plug in at work, at the grocery store, at the soccer field (and charge in a flash, not overnight). In other words, it takes advancing what visionary author, teacher, and clean-tech consultant to numerous heads of state Jeremy Rifkin calls the “Five Pillars.” If that name sounds vaguely familiar, it's because Rifkin was the one that took CPS Energy on a “trip into the future” to see the solar farms of Spain before we had our little nuclear meltdown, crashing our planned expansion of the South Texas Project in Matagorda County in a rancorous lawsuit with our partners at Toshiba and NRG Energy. It was Rifkin that assembled an impressive panel of corporate leaders in Mayor Julián Catro's desired clean-tech revolution for a three-day San Antonio summit and prepared his first master plan intent on making San Antonio that national clean-tech leader.
Rifkin's new book, The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World, which partially treats his time spent in San Antonio, was just published by Palgrave MacMillan. Though his direct consulting gig has wrapped, there are still lessons to be learned from the man who has the ear of European Union leaders and is helping to outline the blueprint for Europe's clean-energy shift.
A guiding principle of this major infrastructure and energy shift as outlined by Rifkin, president of the Foundation on Economic Trends in Washington, D.C., are the “pillars.” These include renewable energy, turning buildings into power plants, a way to store that intermittent energy (Rifkin prefers hydrogen), “smart” grids, and electrified transportation networks. In his new book, Rifkin, interprets the global economic picture as a world trapped between energy realities, a world dangerously stalling out on the high price of oil and the absence of the alternative clean-technology infrastructure.
While San Antonio is quickly asserting itself in the amount of renewable energy we boast (and in our energy savings earned from making our buildings more energy efficient while outfitting them with energy-producing solar panels), we're going to fall into the same bottleneck currently gripping Europe in terms of having a place to store all that energy and deploy it with electric cars and a more sophisticated power grid.
San Antonio isn't tearing up the town in the commercial sector, but residential rooftop solar has gone gangbusters thanks to generous CPS Energy (on top of federal and state) rebates — bursting from four residential arrays in 2007 to 232 in 2011 (with four months to go in the fiscal year). In the same time period we've grown from one commercial solar array to 29. “We're obviously surging ahead in solar, and that gets us points,” said Solar San Antonio Executive Director Lanny Sinkin. “But I think there's probably places that are well ahead of us in how many smart meters are deployed. And I think partly CPS has been sort of waiting and watching to see who has success and who doesn't before making the final leap into one technology or approach.”
The head of CPS Energy's smart grid research and development was not available for an interview, but Kathe Doran, energy management manager for the utility, was ready to brag on the rapid success in energy savings through efficiency. By 2020, the utility has committed to cutting energy use in San Antonio by 771 megawatts, about the amount generated by our newest coal plant, the Spruce II, she said. In three years, CPS has cut 221 megawatts and done it for $59.8 million — $13 million less than it expected. “As we get further on through the years, the savings will get more difficult,” Doran said. “People and companies that were going to do something [to save energy] will have already done it.”
And while competing visions for trolly systems and light rail are developing, they're just that: visions. Same for electric vehicles. Bill Barker, a former VIA official now with the City's Office of Environmental Policy, estimates there are only 50 electric cars in the city, though they're certainly on their way from Detroit and Japan (and Tennessee, come 2013). And though we have a handful of charging stations, we're waiting to see which technology gains dominance before going in any deeper, Barker said.
It's for similar considerations, perhaps, that Sinkin isn't too upset about CPS Energy's delayed announcement on a pending 400-megawatt solar Request for Proposals. “What I heard is: 'It's very complicated,'” Sinkin said. “My position on that is, 'Man, take as long as you need. This is huge deal. We want the best deal you can get and make sure this is a success.”
While the jobs component of whatever solar deal is finally announced, now that we've blown past two deadlines with no word, will certainly get a cheer (manufacturing is part of the deal) — Rifkin's message to us today is that without a grid capable of handling this energy moving into and out of homes and vehicles, this month's rapid expansion may be next month's school-zone traffic jam.
In an interview with the Current last week, Rifkin reported how he is working to help Europe navigate an overabundance of clean energy bottlenecked by an ill-equipped, dated electrical power grid. “If these five pillars don’t move at the same pace with each other in each community, in each city, in each region, then one pillar gets ahead of the other, you lose the entire synergy and you spend billions and billions and you get nothing,” he said.
Below is my conversation with Rifkin about San Antonio, the global energy crisis, and the path ahead.
Your first chapter is incredibly helpful for the way it describes our economic situation in tandem with our energy investments. That until we switch off the fossil fuels, we're going to be, I think you said, “bouncing on the bottom” economically?
It’s a very dangerous period and we're still pretty much in denial of what happened. And this speaks to why Obama is not going to be able to create jobs at this point. ...
The real earthquake was when oil hit $147 dollars a barrel in July 2008. The entire economy shut down; the whole world shut down. Purchasing power shut down because the prices on everything was too high, from food to petrol, because everything in this civilization is reliant on fossil fuels: construction materials, pharmaceuticals, synthetic fiber, food — everything. So when prices started going over $80 a barrel in 2007, we started to see prices go up across the supply chain, and at about $120 a barrel we started to see food [prices] rise. And $147 shut it down. My position is that this was the economic earthquake, and the collapse in the financial market 60 days later was the aftershock. They’re connected, as I say in that chapter. What we have hit is peak globalization. We're at an endgame. We're at a wall. At least in the business community, we now understand the outer limits of how far we can globalize, if we acknowledge it. And more and more businesses I work with are starting to: It’s about $150 a barrel.
And peak oil?
The [International Energy Agency] really pulled everyone aback in December of last year when they put out their world energy report. In one paragraph, which really sent shudders down the spine of people, [they] said [world oil production] peaked in 2006 at 70 million barrels a day crude and we probably plateaued down to about 69 million a day but that it would cost $7 trillion to get the remaining out. I don’t know where we’ll get that. But the reason we’d hit peak globalization at $147 a barrel is because peak oil per capita which occurred over 30 years ago at the height of the Second Industrial Revolution in ’79. BP did an interesting study, which has been confirmed by all the studies since. If you had distributed all the oil we had at that point to everyone alive, that is the most each person could have. So we found more oil but population has risen much quicker so if we distribute all the oil we’ve got now, crude oil, to 6.8 billion — there's just less to go around. So what really happened is in the '90s when China and India made a bid at a 8, 9, 10, 11, 12, 13 percent growth rate to bring a third of the human race into the game, the demand pressure because of the aggregate output forced more and more oil to be used for everything. So the aggregate output went up, oil prices went up, and then all the other prices in the supply chain went up. Then we crashed at $147 a barrel. So what I am saying is, every time we try to rebuild the economy at the same growth rate … purchasing power will go down. It will shut down. And that’s exactly what just happened. In 2010, oil went way down to $30 and $40 a barrel because the economy stopped in 2009. Then in 2010, we started to replenish inventories and started developing growth, especially in India, China, and the Asian countries. Boom! Oil shot up to $94 a barrel before the Egyptian election. And now? What is it today? A couple of days ago it was $112, $115 a barrel, and what’s happening? The prices are going up for everything else. And purchasing power is starting to go down again. So this is a wild ride. Every time we try to re-grow, we collapse, re-grow, collapse. It’s a gyration. That signals to me a long, torturous, very dangerous end game and there is no way to get out of the box. And when I've raised this with the governments I advise and the companies I work with, they don’t say I’m wrong, they just — either they acknowledge it and say we need to move or they just don’t say anything. There’s no way to get through that wall. We try to imagine, it just can’t be done.
On the climate side, do you agree with [NASA scientist] Jim Hanson? I mean, he uses the term 'game over' as well as he's fighting the Keystone pipeline and the tar sands.
Well I think Jim Hanson’s absolutely on the right track. My mistake was I kept underestimating the speed of this, the acceleration of climate change, because I couldn’t anticipate, couldn’t get my mind around all this subtle feedback in this pretty complex system we live in, this biosphere. The feedback loops are terrifying. So when we went to [the UN Climate Change Conference 2009] Copenhagen, we went there and we said, “Look, we want to talk the countries in the world into mitigating at 450 parts per million carbon by 2050. To do that, we go up two degrees, which is devastating. I mean, 2 degrees is really devastating, but we might survive it. But then Jim Hanson really threw us a curve and he said, “You’ve got your numbers wrong.” He and his scientific team looked at the geological record and said we have never been over 300 parts per million in 650,000 years” — which we all knew — “We're now at 370. If we go to 450 ppm the record shows we go up 6 degrees and this is the end of civilization as we have come to know it.”
What I believe is that we are really in trouble. I think we haven’t even begun to anticipate all these new feedback loops like the Siberian permafrost melt. And we know in agriculture we've got big trouble around the world. The biggest problem, and I wish Al Gore and others would mention this, I don’t think he did in his film, it's all about the water cycle. For every one degree Celsius the temperature rises, the atmosphere discharges 7 percent more precipitation. That's a frightening thing. That means more floods, more droughts, the change of the whole water cycle affects everything. Snow melts in the mountains to seawater, that is something so dramatic it takes my breath away. I think that we are in a difficult moment right now, probably the most difficult we have faced since we have been on the planet. In the short run, we are at the end game for the fossil fuel age. We could go to tar sands, heavy oil, and coal, which would up the CO2 even quicker, which means more losses in agriculture and infrastructure and everything that goes with that. (That’s why this tar-sands pipeline is an ominous sign.) Or we can begin to phase into a post-carbon era quickly. If there’s any positive sign here, it’s this: There have been other moments in history where economic eras collapse because there was no alternative option on the horizon. As you know in the book, the point I try to make, which I think is a new point, is that the major economic revolutions in history appear when the new energy regimes emerge. And when they emerge, they make possible more complex, integrated social and economical arrangements and more specialized scales and more complicated societies. When energy and communications revolutions converge you are really changing history because they narrow temporal-spatial orientation allowing you to socialize and engage in trade over bigger areas.
I was going to ask you about that, but before we switch over let me ask you real quickly: why do you think Americans don’t get what you call “biosphere consciousness”? And is that what Obama is missing when it comes to, I think you paraphrased Bush in there, “the vision thing.” Does he just not get the immediacy of climate change?
I don’t know what's in his head. I don't. I do know if you go to any school in this country, any school in San Antonio — and this is true in any school in Europe and its even true in a lot of the developing world — the kids are learning this every day. They are coming to daddy and saying, “Why are you using so much water when you shave? Why do we have an SUV? Where did this hamburger come from that's on the table? How did my clothes get grown?” Not every kid does it, but you've got a generation that is becoming aware that every single thing they do has an ecological footprint that affects some other human being or family or some other creature in the earth. That’s new. That’s all in the last seven years. It shows the biosphere conscience can emerge very, very quickly. That’s a generational shift. I don’t know what’s in President Obama’s mind. … My sense is that he doesn’t have the narrative. In other words, he has the individual senses but he has no story. So when he talks about a green economic revolution, it’s all a policy list, it's like a laundry list. First he shows up at the battery factory, then he goes to an automobile company that is putting out an electric car, then he talks to solar-panel people in a factory. It’s all isolated, it doesn’t tell a story. What he hasn’t grasped is that the Third Industrial Revolution is the real revolution; the technology is a five-pillar infrastructure that has to be phased in simultaneously. And it’s those five pillars, this energy created in those five pillars, that is the technology revolution. Just like in the Second Industrial Revolution, you had pillars: You had centralized electricity. You had the telegraph and telephone, and radio and television as a communication vehicle. You had to have the automobile, you had to have pipelines. You had to have the highways and interstates. And then you had to have the incentives to build out the suburban extensions and then create the travel and tourism industry. It was all part of an infrastructure shift. What he’s doing now is he wants to mend up that infrastructure. What I say is you cannot let the Second Industrial Revolution infrastructure collapse. The business people in my group, we have 120 companies, big companies, we know you can’t let it collapse. It’s dangerous and in a delicate period in the next 25 years when we have to keep the old infrastructure alive, on life support, but aggressively move into the new infrastructure and the new communication-energy convergence. And that’s a difficult thing because it’s two different business models, two different portfolios, two different ways of thinking that you have to do on a parallel track, because we're stuck with the old model and we can't let it die. But we’ve got to put the new model in place. If we're just rebuilding the roads and fixing up aging infrastructure, we're not going to be there.
Print technology, organizing coal steam and rail gave us the First Industrial Revolution. Centralized electricity, organizing the auto, oil, and suburban roll-out gave us the Second Industrial Revolution. And so we start in the EU. The lucky thing there is that we actually have the beginnings of a new convergence emerging. Sometimes in history, there is no new convergence. Rome fell there was nothing to replace it in the 6th century. So what we’ve been noticing is that we had this really powerful internet revolution in the last 15 years, and what’s interesting about the internet, unlike centralized communication electricity in the 20th century, is this communication is distributing collaboratively. So the power scales laterally not pyramidically. And so you’ve got a couple billion people now who can send their own video, audio, and text to each other at the speed of light laterally, nodally, with more power than the top 10 centralized television networks of the 20th century. What we're beginning to see in Europe, and now is spreading to the other countries, and a little bit here, is that this distributive, collaborative internet communication revolution is now merging with this new energy regime [of] distributed energies. So when distributed IT and internet communication technologies begin to actually become the communication vehicle to manage distributive energy, we have a very powerful nervous system in which we can set up a 5-pillar infrastructure for the Third Industrial Revolution where we have the possibility of thousands and thousands of new businesses and millions and millions of jobs because you have to build the whole infrastructure over the years.
Now, what people have had a hard time grasping is what we mean by distributed energy. That's been difficult. When we think of energy, we think of energy as centralized, because they all need coal, gas, and uranium — they’re not found everywhere. You have to organize and centralize and then the scale has to be vertical, and the money, huge amounts of money, to bring them from the source back to the end user. And you have to have a lot of geopolitical management and a lot of military intervention to secure these very, very precious resources. But those energies are clearly sunsetting. The prices are never going to go down for any fossil fuel again. That we know. The way the tar sands are going, they’re only going to go up. And now the entropy bill is only going to go up. So how do you grow an economy when you know your basic energy regime and prices will never go down again, only go up, and the entropy bill you have to pay for them in terms of climate change is going to go up and never go down? That’s where the denial comes in versus the acceptance.
The EU is committed to this 5-pillar infrastructure for the Third Industrial Revolution based on the idea that renewables are found on every square inch of the world: in the wind, the heat underground — you’ve been writing about it for years. It’s found everywhere. So they are distributed by nature because they're found everywhere in different proportions and frequencies so they can be a little bit less distributed and more centralized, but they are distributed because they’re found everywhere. Under Merkel’s presidency to the EU in 2007 we committed to 20 percent renewable energy by 2020. That’s a mandate; that’s a third of the electricity in Europe. Germany hit the mark two weeks ago. They hit it way early and they’re going to 33 percent. They’re moving really aggressively and they’re exporting all their technologies to everyone else. But that’s Pillar 1. Pillar 2, and this will interest you in all of your coverage over the years, is how do we collect this energy? The first thought in Brussels was, “Oh well, you know, the Spanish, the Greeks, the Italians, they got all the sun. Let’s go down to the Mediterranean and grab it. Centralize it. Big solar projects. Send it back. The Irish have the wind, the Norwegians have the hydro, they'll put in big lines and send it around Europe.” I don’t oppose using large solar, wind, geothermal, and, with some big qualifications, hydro, all right?
This is the old industrial model? The centralized model?
That’s right. Well that’s why it was old-time thinking because it was based on centralized elite energies. And so we kind of asked a question which sounds embarrassingly simple now but one we haven’t really asked in the U.S. yet, which is: “If the new energies are found in every square inch of the world and they're totally distributed, then why the hell are we only going to collect them in only a few central points?” That was a pivotal key. We realized we can collect them everywhere, but where do you collect them? Infrastructure, buildings. So we have 191 million buildings in the EU: homes, offices, buildings, every kind of building. They’re the number one cause of climate change because they use a third of the energy and most, a majority of the CO2. Parenthetically, I always mention this when I’m doing interviews, as you know, the number two cause of climate change is beef production and consumption and animal husbandry. Three is transport.
The reason I always mention that is because not a single world leader, including the ones that I advise, have made a single statement on the number two cause of climate change. Never. Not one. It’s amazing. Anyway, so the idea here is to take all the existing buildings in Europe, and Germany is moving very aggressively and I can tell you how their doing it, and convert them to partial power plants, mini power plants. Sun off the roof, wind off the walls, and geothermal heat under the ground; convert your garbage with an anaerobic decomposition; oceans tides and waves if you live on the coast. The new buildings going up are zero-emission and we now have positive-power buildings. They just finished the first positive-power [building], a massive office complex in Paris three months ago. It actually collects enough sun alone that it can not only take care of its own energy needs but send power back to the grid. The idea of this Pillar Two is that this jump-starts construction. Now think about what Obama said last night, it’s all about construction. That means not just retrofitting, which is key to us as efficiency, but efficiencies are just the starting points so that we can get our buildings up to speed so that we can maximize the thermodynamic efficiencies as we move to the new energies. You follow me? So with us, we see massive construction across the 27 member states to convert as many buildings as we can over the next 40 years in the existing stock, and all the new ones, into micro power plants. This will bring huge amounts of work and millions and millions of jobs, it’s a massive undertaking and Germany is leading on this. Pillar 3, we ran into this issue back in 2002 when Romano Prodi [former president of the European Commission and prime minister of Italy] was president, I was advising him and we knew were going to 20 percent renewable energy at this point. We thought we would. And I said to Romano when we met in Washington at one point, I said, “You know we got a little problem because let’s say we get 20 percent renewable energy across Europe by 2020, a third of the electricity.” I said, “What happens if it’s a hot summer, we have an overload on the air conditioning, we have cloud cover for two weeks, and the water tables are down for hydroelectricity because of drought, and the wind stops blowing?” Romano’s really a wonderful man actually and a great prime minister, he said, “Well, that’s interesting.” What that meant for him was that he was going to try to solve it. And three months later he put a 2-billion-euro hydrogen R&D together.
Frankly, I’m for all forms of storage: water pumping, flywheels, capacitors, and batteries, they’re all necessary. But the reason we like hydrogen as the centerpiece is it can take bigger loads, batteries can’t. It can be involved in infrastructure and take big loads, and it’s modular — the lightest element in existence and it’s a carrier. So it will carry renewable energy as a system, that’s Pillar 3. Then Pillar 4 is the internet communication revolution merging with the new distributing energies which is really off-the-shelf internet technology. The idea is to … transform the power and transmission lines into an energy internet, that way millions and millions of buildings are collecting on site that distributed renewable energy stored in hydrogen like you store digital and media? Same thing. And then what you don’t need your software can direct it across entire continental land masses with that technology. Then Pillar 5 is electric plug-in transport. We're very worried. Diamond is in our group, GM, and electric cars are out, fuel-cell cars in 36 months, and you'll need to plug them in. You’ll see cars in 35 months and we need to plug them in so you can get your green energy anywhere in the infrastructure and plug in across the infrastructure to either get energy or send it back. But here is why we're concerned: If these 5 pillars don’t move at the same pace with each other in each community, in each city, in each region, then one pillar gets ahead of the other, you lose the entire synergy and you spend billions and billions and you get nothing. And the way we found this out was the hard way. Even though we had this plan, the EU put out a document last year and they said, “Oh my god, we need a trillion Euros right now for the smart grid between now and 2010.” Think about that compared to what we're talking about smart grid. They’re talking a trillion, and the reason they need this is we put in feed-in tariff across Europe.
So we asked all the countries in Europe to put in feed-in tariff’s, right? So now we have thousands and thousands of people, you know, homeowners, businesses that are trying to feed-in renewable energy in the grid but the grid can't take it. It’s designed to serve a mechanical or unidirectional [function], and it’s old and falling apart. So were losing the possibilities. Then we realized, “Oh my god, some of our regions now, like Nava and Aragon, Spain, are so successful, they’re 70 percent renewable. Places like Germany are now over 20 percent. And that means we’ve got a problem because they're intermittent energies and we don’t have the storage yet. So we're literally like California where they lose 3 out of 4 kilowatts of wind because they don’t know how to store it. We're realizing now that we're moving so aggressively towards intermittent renewables if we don’t move as aggressively with Pillar 3, with storage, we lose 3 out of 4 kilowatts. We just lose it. Then we get a little bit of a backlash because consumers are paying slightly more on their electricity charges, very little, tiny but they’re not getting any of the benefit on the feed-in tariffs. So now we realize we have to incentivize Pillar Two so we're introducing green loans and green mortgages really quickly across Europe and it’s working.
So what I am saying is, we're beginning to find out — that’s why we did this master plan for San Antonio, which was the first one in the world we did — you’ve got to bring them all in at the same time or as you said at the beginning you end up with more temperate, little isolated projects and you don’t go for it, and you really don’t create the new infrastructure. Sorry to go on and on.
No that’s great, that’s a really good background and I think it helps put San Antonio into context. I mean, you came here and two of the things you recognize as you talk about the challenges of our city — one is the economic contribution that is tied in by design with our utility, but then also the high level of poverty in the city. The “Two San Antonio’s” you heard about so much while you were here. When you were creating the master plan, how did you take those issues in mind and kind of work through a rollout of the five pillars for this city?
We looked at the numbers and we looked at what San Antonio under [former Mayor Phil] Hardberger and [former chair of CPS Energy's board of directors] Aurora Geis, what the numbers were that they wanted to get to on their carbon reduction levels. Then we looked at what it would take to phase in 5, 10, 15, 20 years toward the new system without collapsing the old one. And when we took all the variables and ran all the numbers with our economics group, what we found is —and we found this in Rome, and that plan is really moving aggressively now in Europe — what we found is that every community and every city in good times or in bad times or even in depression has [Gross Domestic Product], there is always GDP. A percentage of that GDP in the worst of times is used for new investments. It’s never completely stalled; there is always public-private investment and a small part of GDP. I don’t remember the exact numbers in San Antonio but what we found is that they used just a small percentage of their GDP and just a small percentage...
I think it was like 5 percent or something...
Was it that high? I have to go back and look. If they can take, it may be 3 or 4 percent, and use the other 96 percent on keeping the old system alive, on life support because we don’t want it to collapse, that’s also the key to keeping the economy moving. If you only spend a few percentage points, but it was systematic and comprehensive in getting the new structure in and you kept it moving without any fallbacks year after year. You could phase it in over 20-25 years.
Was part of the challenge having to work with multiple governmental groups? I mean, you don’t just have the city but then you’ve got the county. Really, you have a regional… Were you looking at multiple counties, like the metropolitan region?
Yeah we were. This plan was collaborative. We spent a lot of time with [CPS Energy sustainability director, Cris] Eugster and a whole team over there. This was truly collaborative. We laid out each step and all the possible options, and then we had continuous feedback back and forth between CPS. This was not just us. In fact, we can't do these master plans unless there’s enough confidence at the local level that they have expertise that is parallel to our group’s expertise and they definitely did in San Antonio, for sure. Having said that, one of the things we said to them was that San Antonio can be the center of the southern Texas network. We recommended they create lateral networks and become part of a critical network in South Texas to launch third industrial revolution as a flagship for the country and we're mindful that Texas oil wells were synonymous in the second industrial revolution. It’s Texas oil wells that gave us the auto culture. I was mindful that CPS, early on, Aurora Geis made it very clear to us that they wanted to move in this direction and be a flagship. It was just serendipitous that they became our first master plan even though most of our work is on the other part of the world. So we said you could, you need to develop all of southern Texas. What’s interesting here is that fossil fuel energies, because they're elite and centralized, they scale vertically, they cost huge amounts of money in capital, and therefore all other businesses scale vertically with them. You need big factories that are centralized, the logistics that are centralized, and that’s what we have in the 19th and 20th century. What's interesting about the third industrial revolution infrastructure and energy is they scale laterally. They’re nodal. That is, each community and region becomes a node and creats a 5 Pillar infrastructure, creates a biosphere park, if you will. These energies like to move uninhibited across landmasses like information likes to run free on the internet. So once you have a node, you want to connect with the next node, the next node, the next node like wi-fi. And what we see this happening in Europe and the other places we're working. Each node starts to develop, they get the 5 Pillars, and then they want to hook up with the next metropolitan area, extend it to suburban world, then the next, and the next, and the next. That’s the way it comes in. Then we suggested to San Antonio they were ideally positioned to do this. First they're a public utility, which gives them quite a bit of an advantage. Secondly, they were already ahead of the game when we came in on wind and they were moving towards solar. Now, post-nuclear, they are really ideally positioned, because now the nuclear is no longer in the equation. They are ideally suited now in southern Texas to actually make an historic difference, not just in Texas, for the rest of the country. We are now hearing from other utilities, big utilities that want us to come in now in other places in the country to start moving this thing. We just haven’t been able to turn our attention here, but we will be starting in January and there will be other states involved. California, for sure.
Well, let’s talk about what happened here. Then I am also interested to see if the work in San Antonio is then going to replicate, at least more in the theoretical and planning side, replicate itself elsewhere. It seems like…
Can I make one point? This is really important, this whole question of scaling a lateral power. One of the biggest issues in Europe, and this happened in CPS too, is the question, “How do you make money?” CPS is the cash cow for the city, it’s a third of the revenue for the city. … The question for the power utility companies everywhere is how do we go to a Third Industrial Revolution and make money? Our job is to sell electrons and the more electrons we can control — the more energy we control at the beginning, and the more electrons we control in the distribution — the more money we make. “You’re telling us you want to sell less electrons, how the hell do we make money?” In Europe, this was the big problem. … Here’s the new model we’re presenting which is now really getting moving in Europe. In the new model, like in San Antonio with CPS, increasingly the energy is not coming centralized from CPS. They’ll still be in that for a long time, [but] increasingly energy is going to come in from the communities, from consumer cooperatives that were put together, from neighborhood associations, from SME’s, from big businesses, middle-sized businesses, technology parks as we move to a Third Industrial Revolution. If history is on the side of this, were going to have more and more infrastructure feeding into power, the power will come from the people. So then what’s the job of a place like CPS? Its job is to run the energy internet, because that’s technical. But it also has another job. We use the IBM case study, and this is how it changed in Europe. This is very important for CPS because I am not sure it’s not quite there yet, but we recommend it. It’s flirting as close as any utility company can but hasn’t quite done it yet. There’s a classic idea in case-study models used in MBA schools, we use it at Wharton [School, University of Pennsylvania] where I teach, and that is, in the 1990s Lou Gerstner and IBM were worried. They were making no money on this physical computer, their margins were down because everyone was putting out computers and the quality was the same everywhere so they weren’t making any money. So IBM began to ask the big question, “Well, how do we make money?” And they asked the second question, which was key, and that is, “What is our real expertise? What do we have that the world needs?” And they came up with the idea: “We manage information, that’s our real expertise, not making computers.” Now every company in the world, even small companies, have chief information officers, and IBM manages information and so do many other companies all over the world. But we said here, “What’s the real expertise of CPS and all the power utility companies, especially the ones in Europe?” They said, it’s managing energy. And so in the old model, you control the supply of fossil fuels, you control the distribution, but the cost of those fuels and uranium are going up and the climate change bill is going up, and the multiplier effect is exhausting when you're an old grid. In the new model, we provide the energy, you run a more and more distributed energy internet, and your job at CPS is to then set up partnerships with thousands of clients in which you manage their energy flows so that they can reduce their energy needs and increase their margins. This is critical. What we are saying, and our business group around the world is saying to every company is the key to whether you survive in this very challenging transition period over the next 30 years as we move to the gyration of the end game of the fossil fuels' Second Industrial Revolution and we emerge in the Third Industrial Revolution with the new energies. The real key is energy, not labor costs. Energy costs and the volatility that are reducing margins, increasing the transaction costs and reducing the margins. So to the extent a company survives at all and prospers during this dangerous transition, they have their thermodynamic efficiencies up, which will increase productivity and keep their margins from collapsing. So any public power utility's job is now to help their corporate clients, commercial clients, manage their energy flows, increase their thermodynamic efficiencies and productivity, and then their clients can share the energy savings back with them, and their productivity gains. There is far more money to be made in managing these energy flows for companies across these supply chains and sharing in the productivity gains and savings than they ever get in selling electrons. But here you make money by actually selling less electrons and showing them how you can manage it with less electrons. This is what the shift that we’ve introduced in Europe, this is the shift that is going to move around the world in the next 12 months. Because from a business point of view, it’s incontrovertible this is where we're going. That’s because the new energies scale laterally. And they allow you to organize energies laterally, and power utilities can then not only manage energy flows but set up partnerships with various clusters of companies around those energy flows. So I just wanted to raise that because that’s pretty critical because everyone says, “Well, you know, if CPS is selling less energy, how do we keep money coming in to the coffers?”
Well you also pointed out in the original master plan that the jobs component was far from inconsequential over that 20-30 year period…
Well it’s massive. It's massive. Because think about the conversion. Here’s Obama talking about mending some bridges — which we better do — and some roads, and putting a little money into the grid. What we're talking about is the complete conversion on the entire infrastructure of every community of the world, meaning Pillar 1. Huge amounts of jobs are in harvesting and moving to renewable energy technology and producing it. Pillar 2, you’ve got to convert every damn building in every community and region into a power plant. That’s 40 years of reconstruction, retrofitting, everything. Pillar 3: Imagine how many jobs you have to create to put actual storage in, hydrogen storage across every part of an infrastructure. Pillar 4: We have to convert the entire power and transmission line, that’s 30 years. Pillar 5: We have to develop logistics and transport that’s completely plug-in to the system. So when you look at what has to be done, it can actually employ two generations between now and 2040 in full employment. But then we have to be able to actually think about public-private partnerships.
Now America’s going the other way, we want government out of this. That’s absurd. The first and second industrial revolutions relied completely on public-private partnership. The Libertarian myth is that the marketplace created it. The market place didn’t underwrite the power utility industry or the auto industry or the oil industry or the interstate highway expansion or the FHA loans that allow people to get homes in the suburbs and commercial incentives that allow depreciation for commercial building. All that was government. So what I am saying here is that the opportunities are really here to create lots of jobs. The coalition we put together in Europe on the ground is quite different from here. Last year, you saw in the book, we mentioned that the UEAPME [European Association of Craft, Small and Medium-sized Enterprises], which is the federation of all SMEs [small and medium-sized businesses, or enterprises] in Europe. All the SMEs have come together; they represent almost 65 to 70 percent of the businesses in Europe. … They now are a whole interest group that scales laterally and in our lobby group are moving this in place. Here I don’t know who that group would be, you could have the trade associations, which we are trying to do. But you really need to get small business behind this, and then consumers, and everyone else like we have in Europe, so you have people that are incentivized to move this in terms of mass acceptance. It's a nice challenge.
With mass-acceptance, specific to San Antonio, how significant was the kind of mischaracterization or lack of context in the initial reports about the cost of the master plan?
Well, it was a little bit of a, a big surprise to us. All of a sudden we get this feedback that “Oh my god, Rifkin and is team are saying we need billions and billions of dollars.” And anybody, I don’t know why that happened frankly. But I was in emergency mode, saying “What is going on here?” We were talking about x-billion over 25 years phased in with all the appropriate incentives, money that would have been spent anyway on old infrastructure. So that was a little bit of a shock that it happened. I hope that, you know I immediately got a hold of people in civil society and talked to folks, and … they figured out very quickly that that is not we were talking about. If you read the report, it's absolutely not. I don’t know how much that hurt in the short run. I don’t know why it was put out that way.
I still hear people that I think would know better that have been supportive of the plan say, “Oh,” it’s like it’s already gone in to our historical databases, “Oh, that was too expensive.” Somehow that caught traction because there was never any follow-up to say, “Well what is this plan really?” And I thought that was really curious…
I don’t know, I think it was because of the shake up at CPS.
Yeah, in the middle of everything else.
But I do think from what I understand that they are taking for sure bits and pieces of each of these pillars, there’s no doubt about that.
I don’t think [CPS CEO Doyle Beneby] sees buildings as power. I don’t think he sees really decentralization.
No, that’s the key. That’s the easy stuff. But then you have to move to the real economic opportunities for thousands of businesses and lots of jobs, huge amounts of jobs. And you have to move through a distributed collaborative model. This is really, we call this distributed capitalism, it’s really a democratization of energy. It allows everyone in San Antonio to be an energy entrepreneur, every homeowner, every renter, everyone. But it also requires everyone collaborating in more of a social-market model. It requires an extension of entrepreneurism, you flatten it —everyone is involved in the game, everybody that has a building — but then you also have to collaborate in social spaces together and do this in that way. So it’s very difficult for power utility companies that have thought traditionally centralized, top down, to begin to think you have to do both the old model and the new, which is distributed collaboratively. So what we’ve noticed in other power utility companies there's a generational struggle going on, but I have no doubt this is where were headed. In other words, short of a collapse, there is no Plan B. If what we're talking about isn’t the plan to move us to a new economic era, I'm just at a loss. If someone has another plan, I would love to see it. Our companies haven’t seen it and we came to this not out of some brainstorm but just, “This will work.” We realize we need to go to renewables because they’re going to be cheaper and cheaper; fossil fuel is going to be more and more expensive anyways. We knew we had to find a way to collect them, and so that's infrastructure. We knew we had to find a way to store them, because they're intermittent. We knew we had to find a way to share them across grids with everyone participating, and that’s internet. And then we had to find plug-in transport. It took us years to get to this, but all of the companies in our group, they say this is the infrastructure. And I don’t know what other infrastructure there would be. But it is a very big change in power, literally and figuratively. It changes the way we organize fundamentally our social, political, and cultural ways of life. This is truly a flattening capitalism. It’s definitely a democratization of energy and it threatens some of the old ways of doing, for sure.
You don’t stop with the Third Industrial Revolution. This is not the end of the human experiment here. You kind of forecast a little bit into the next era, which you call the 'collaborative era.'
In the next 40 years, the build-out of this infrastructure will provide two generations with jobs. But what’s interesting is the infrastructure itself then becomes smarter and intelligent. So the infrastructure will take 40 years of more labor-intensive, traditional mass-wage labor to build out. What’s phasing in though, the intelligence itself allows you to run the economic system with a more and more boutique and professional workforce, which is happening. So what we need to do is prepare young people for parallel traffic in education, which is to be prepared for work in the commercial arena but also in civil society. That’s where the growth jobs are going to happen, that’s where they are happening around the world. So yeah, I ended with that. I am glad you made note of that. What’s interesting is it's really the last of the great industrial area, but it's also the first of the collaborative age, which is quite different. And I think by 2050, if we survive all this — and everything I say this with a grain of salt, because anything can derail any of this. It’s nice on paper but then you have the real world — but I think by 2050, what we know as the commercial sector will have very small workforces, increasing employment in the not-for-profit society. … There’s a long way between now and then. Forty years, as I can tell you because I'm an old guy now, it goes pretty quick.
The next step is: You can't just do the parts. You’ve got to look at the whole system they have put together and find a way to create public-private partnerships, bring in the community big time on this. Bring in the neighborhoods, bring in the civil society, bring in local businesses, because San Antonio has a real opportunity here. It’s the seventh largest city in the country. They are a city that has a lot of opportunity, but they have two San Antonio’s, a smaller, wealthy middle class, a large poor, mainly Latino underclass. But they have an opportunity to do something that could be a real model for every other community and region, and they’re already a step ahead of the game. Not just because we were there, they were already moving in that direction. What they need now is the kind of inspired leadership at the governing level, and at the CPS level, to do what we're doing in Europe. They’re not coming in alone because Europe is starting to move on it. If Germany can do this, and they are doing it, why can't San Antonio do this for Texas and Texas lead the country?
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