The Internet of Things, Energy and Future Economies

Share this

Ron Phillips of Coastal Enterprises photo by Kay MannCoastal Enterprises, Inc (CEI) held its 37th Annual Meeting at Bowdoin College March 10, 2015 and bestselling author Jeremy Rifkin was the keynote speaker. Due to commitments in Europe, Mr. Rifkin presented live via HD video; Green Energy Maine was there and brings you this report.

The meeting began with a progress report on CEI's $128M Platform for Sustainable Lending and Investment, and recognition for an innovative worker-owned cooperative in Deer Isle. Employees of 3 stores that were for sale formed an employee owned co-op to take over the stores when no buyer came forward. Island Employee Cooperative (IEC) Board Chair Alan White accepted the award on behalf of IEC.

CEI is the newest charter member of Neighborworks America, which donated $235,000 to CEI as part of their partnership charter. Neighborworks has helped with a triple bottom line collaborative to create more ways to invest in community development for people who live in affordable homes. 

Yellow Light Breen of Bangor Savings Bank photo by Kay MannYellow Light Breen of Bangor Savings Bank reminded the audience that CEI was created out of the civil rights movement. He talked about the idea of creative destruction and how it can bring opportunity for positive change. The internet of people connects people at the speed of thought, passion, trust and relationships. According to Breen, what people in economically depressed areas need is hope, before investment can have impacts. He cited a project called "Our Katahdin".

Jeremy Rifkin photo unattributed used by grace of creative commonsAfter introductory messages were given via videoconference by Chellie Pingree and Angus King from Washington, Mr. Jeremy Rifkin was given the floor.

Rifkin set the stage by noting that GDP is slowing all over the world, productivity is waning and unemployment is high. Millions in the USA have left the workforce and are not counted in the economy. Wages have been stagnant for 20 years and all of us are doing worse economically.

THREE DRIVERS

Mr Rifkin says that we are in the early stages of a new wave of economic elevation he calls the general purpose technology platform. The 3 technology areas of this platform are: communications technologies, new energy sources and new transportation methods (to move economic activity).

In the industrial revolution, steam power printing was a disruptive communications technology that converged with cheap coal and steam engines.  The telephone was invented, followed by radio and television. Henry Ford put it on the road. This development continued building until 2008, when the price of crude oil hit an all time high and everything started falling down. We are in the end game of the industrial revolution. What does it say about our society when we are searching for oil in rocks and sand?

We are on the verge of a third industrial revolution, being powered by the internet, GIS communications, new energy and transportation/logistics technologies. We are investing billions of sensors that can monitor and deliver data from all sectors of the economy. This has the potential to connect all humans to each other in real time. It also presents problems such as threats to net neutrality, privacy, data security and service disruption vulnerabilities.

If we can address these issues, huge changes can occur. Three million people are now connected to the internet; soon everyone will have it available. This is important to the democratization of economic life. We are all part of the value chain; each person can carve out their part in the value chain. We can each mine the data from the overall flow that we need to dramatically increase our productivity.

THE SHARING ECONOMY

Rifkin went on to describe what he calls "the sharing economy", in which goods and services will be virtually free. At any given moment, we have 3 billion people who are PRO-sumers as opposed to consumers. The sharing of music on Youtube is an example. Other examples would be news blocks, wikipedia and six million students taking online courses from the world's best universities. TV is shot; young people are on Youtube today. When we democratize education, it creates vast economic opportunities.

The internet of communications, energy and transportation will produce low-cost and efficient logistics within 25 years.

Germany has 27% clean electricity and will have 100% by 2040. Solar and wind electricity are on an exponential downward cost curve, as computers have been: an installed watt of solar power cost $76 in 1970 and only costs 36 cents today. Millions of people in Germany are producing clean energy at zero marginal cost. Millions of small plays have come together to create a new model called cooperatives, notably electricity cooperatives, which are financed by loans that are easily paid back through cost savings.

There have been days in Germany where there was a negative cost for electricity because the capacity needed to store excess energy is still under development.

DEMOCRATIZING ENERGY

With regard to the power infrastructure, when feed-in tariffs are instituted, tens of millions of people can be producing clean electricity.  In the long run, we will move from centralized power generation to aggregating the energy internet. The centralized utility companies would traditionally oppose this concept and they are a value chain. They are using algorithms to determine whether more money can be made selling less electricity, sharing the benefits of efficiency with ratepayers.

In transportation, car sharing, using such services as Zipcar and Uber, has given our younger generation mobility without vehicle ownership.  Millennials will see a day when no one has to own a car. With GPS guides, 80% of vehicles can be eliminated. Rifkin predicts that in the future, all vehicles will be electric and run on fuel cells. The first generation vehicles are already in production; it is just a question of scaling up.

In the manufacturing of goods, people will again reduce their marginal costs by capitalizing on the same three internets: communications, energy and transportation logistics. Zero marginal costs can be achieved by sharing energy, transportation and everything else. The curve of the sharing economy is going straight up.

Rifkin used the metaphor of a parent and child relationship: the parent is capitalism and child is the sharing economy. A parent can't control the child forever. As the "child" grows to maturity, there will be two economic systems for a time, living side by side in the same household.

AGGREGATE ENERGY EFFICIENCY

We teach business leaders an inverted economy of scale. The internet of things is designed to be distributed and scaled laterally rather than vertically.

According to Rifkin, 86% of productivity comes from aggregate energy efficiency, which might be called the ratio of potential to useful work. We convert productivity across the value chain; historically, 97% was lost at every conversion. The laws of thermodynamics apply to business, too. We can move from 13% to 40% aggregate energy efficiency in the next 25 years, through use of the internet of things.

HOW TO PAY FOR THIS?

The old infrastructure has maxed out. In the US, we spend massive amounts of money every year on old paradigm infrastructure. If we would instead invest in the infrastructure of the internet of things, we will move to a new economic rebirth within 25 years. In China, $82 billion is being invested now in a distributed energy internet. If the US does not follow suit, we will not be able to compete.

This internet platform will create jobs. Telecommunications companies need to build out now. In Maine, we can put people to work by transforming our economy from one driven by fossil fuels to one powered by efficient, distributed energy. This means retrofitting every building in Maine and this means millions of jobs. We also need to convert to smart electricity meters. Once these changes are completed, energy savings will pay for it; that is what is meant by zero marginal cost.

We will need a lot of consumer electronics technicians in this new economy. These days, kids are sitting home at dad's house with all the qualifications to jump start a new digital economy, yet somehow unable to find work.

THE ELEPHANT IN THE ROOM

Mr. Rifkin summarized by saying that his whole latest book is about the elephant in the room: the fact that humans face extinction by the end of this century if we do not depart from the ways of business as usual. Change is the only means of survival.

Rifkin cited the "acceleration of feedback loops on water cycles". We are a watery planet and for every 1 degree of increase in Earth's temperature, the atmosphere sucks up 7% more precipitation into the clouds, producing more extreme winter snows, more dramatic floods and droughts. Our ecosystems are going down. We are now in the 6th extinction wave since the planet began. The shift to the internet of things platform will cause the conversion of the value chain to dramatically increase efficiency and thereby productivity. This will begin to redistribute resources in a circular economy.

Maine is a stubborn outlier, often the first to adopt new ideas: a starter. Rifkin urged the audience to lay out the road maps and expressed the hope that the next time he visits with us, we will be able to tell him about the new ideas we are bringing into reality.

QUESTIONS FROM THE AUDIENCE:

Q: There is a concentration of wealth invested in a the old economy. How does this impact vision?

JR: Internet service providers. We are going to see the democratizing of economic life. We won't have to do much redistribution: the new economy gives and shares freely.

Don Gooding: We are seeing the beginning of a finance side revolution: crowd funding is emerging.

JR: Crowd funding is a niche investment tool that is growing. There are interesting financing models. Anyone in France that has a savings account can designate that the interest be invested in the new economy. People still get a return. If you brought together all the people in Maine and looked at such new models being used in other regions, you can effect real change.

John Egan, Lender with CEI: Our market is facing headwinds from public policy. How did Germany pave the way to distributed generation?

JR: Germany introduced feed-in tariffs. This allowed early adopters to set up electricity cooperatives and they get credit for being early innovators.  There is a mis-information campaign in the US, being waged by energy companies. Behind the scenes, US power companies are engaging in long term contracts for solar and wind. Ratepayers pay an upfront premium, and once the technologies are adopted, no other system can compete. In Germany, they understand the fact that you need both government and industry at the table. You need market capital, social capital and investment capital.

Q: I'm concerned about the backward direction we are going: how do we get there from here?

JR: Start the journey tomorrow morning in your own community. At the local level, government is much more into problem solving than at higher levels. Start conversations between business and government locally. The state of Maine will catch up when they see it working. In Germany, (a federation of regions), it started both from the bottom up and the top down.

Q: What is meant by zero marginal cost? What about high fixed costs, especially in northern Maine, with its low population density?

JR: Fixed costs are on exponential downward curves. We have thought linearly, traditionally. This generational shift will bring opportunity to mine the analytics and learn where digital innovations can permit companies like Sysco and GE to forecast earnings of $14 trillion by 2020.

We don't want to lose a generation.

Tim Schneider, Maine Public Advocate: The idea of driverless cars and ubiquitous connectivity seem very insurmountable; how do we not leave rural areas behind? Telecommunications are not a problem in Maine; driverless cars and boats will shrink distances for people. These technologies will have a greater effect in Maine because of our higher quality of life. It bodes well for Maine.

JR: I agree. The analytics will allow us to warehouse goods in distribution centers using the most efficient routes. Many warehouses will join together in cooperatives. This will bring together the whole system and reduce traffic on highways.

Ron Phillips of CEI: What do you do in your free time?

JR: I just turned 70 in January; being the oldest man on the plane is not a good thing. We have land in Virginia we have converted to a wildlife refuge. Our big love is nature. My goal is to ride fewer planes and spend more time in Virginia.

About Jeremy Rifkin:

Mr. Rifkin is the principal architect of the European Union's Third Industrial Revolution long tem economic sustainability plan to address the global economic crisis, energy security, and climate change. Mr. Rifkin is the bestselling author of twenty books on the impact of scientific and technological changes on the economy, the workforce and society. His latest book is called, "The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism". Mr. Rifkin may be contacted through The Foundation on Economic Trends.

About CEI

Founded in 1977, CEI has grown and adapted to changing markets and new possibilities, always focused on helping people, especially those with low incomes, reach their full potential. CEI makes loans to or invests in businesses that economically contribute to the community, that offer livable wages to employees or ownership opportunities to the borrower, and are environmentally responsible. This is called 3E or Triple Bottom Line investing. The 3 E's stand for:

Economy: Generates a viable financial return, either by maintaining or creating profits, return on investment or a tangible asset.

Equity: Provides an opportunity for disadvantaged groups to access information, housing, financial resources, or livelihoods/employment.

Environment: Results in a positive impact on the natural environment by reducing energy use, waste, pollution or material use, or by improving stewardship of natural resources.

Read more on the CEI website.

Image credits: Jeremy Rifkin photo unattributed, from the sharing economy of the internet. Photos of Ron Phillips and Yellow Light Breen by Kay Mann.

0