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Best of SA 2013: 4/24/2013
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Jeremy Rifkin on San Antonio, the European Union, and the lessons learned in our push for a planetary-scale power shift

Photo: , License: N/A

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The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World, Jeremy Rifkin, Palgrave MacMillan, $27, 291 page


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?”

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