Where do we stand at this inflection point in history? There is a growing sense that we are paying a terrible price for the fossil fuel civilization that we built and exulted in for more than two centuries and that is now taking us into a series of climate-changing events and a new reality that we can barely fathom.
Humanity is experiencing a great awakening of a different kind. We are beginning to see ourselves as a species and just beginning to ponder our common fate on a planet where nature’s rhythms and patterns are becoming alien.
A younger generation is coming forward with an intimate sense of the darkness that is unfolding around them and a steely determination to break through the lethargy that has allowed us to slip to the very edge of a planetary crisis. They are angry, determined, and motivated, and unwilling to listen to why we can’t do this and can’t do that, mulling over what’s realistic and what’s not, at a moment when realism itself seems so unrealistic and inadequate to the mission ahead of us.
However, we are not totally in the dark and without possibilities. There is a way forward. A path has been laid across the European Union and the People’s Republic of China, and even here at home in California, New York, Texas, Washington State, New Mexico, Hawaii, and other scattered parts of America, that can take us on a new journey away from a death-driven Second Industrial Revolution and into a life-affirming Third Industrial Revolution.
The enthusiasm around a Green New Deal that is echoing across America is music to my ears—a sweet refrain that takes me back to 2007. Just as Alexandria Ocasio-Cortez and the Sunrise Movement have captured the attention of the country with an urgent “slap in the face” reality check, that feeling and sense of urgency surfaced across the European Union more than a decade ago.
The EU was on the move. By 2007, Europe had surpassed the United States and become the “idea factory” and deployment engine for decarbonizing society. That year, the EU was finalizing the 20-20-20 formula, binding the EU member states to the Great Disruption that would bring on an ecological age. These new protocols required all EU member states to increase their energy efficiency by 20 percent, reduce their global warming emissions by 20 percent (based on 1990 levels), and increase their generation of renewable energies by 20 percent by the year 2020, making the EU the first major political power to establish a formal, legally binding commitment to address climate change and transform the economy of hundreds of millions of citizens.1 I’ll come back to the history of this path-changing event and what has happened since in the coming pages.
The 20-20-20 mandate was a powerful tonic, providing Europe with the framework it needed to transform the continent into a zero-carbon society. While the ink was still drying on the new global warming mandates, the first buds of a Green New Deal movement appeared.
Nine people, all of whom had been longtime climate campaigners, came together in the UK to create the Green New Deal Group.2 The group was eclectic, made up of individuals from a wide range of fields, including experts in energy, finance, journalism, and environmental science—just the kind of interdisciplinary collective needed to rethink the economic paradigm in a world facing climate change.
In 2008, the Green New Deal Group issued a 48-page declaration titled A Green New Deal: Joined-Up Policies to Solve the Triple Crunch of the Credit Crisis, Climate Change and High Oil Prices.3 This plan encapsulated the central themes adopted that year around the newly mandated 20-20-20 formula and outlined the key building blocks and components of what would become a zero-carbon Third Industrial Revolution paradigm shift.
Admittedly, it’s a bit ironic that a European-based group latched on to America’s greatest public works project—President Roosevelt’s New Deal—to find inspiration for envisioning a transformation of the European economy into a green era. But that’s exactly where the Green New Deal got its legs.
Just a year later, in 2009, the Heinrich Böll Foundation—the official foundation of the German Green Party—issued a manifesto titled Toward a Transatlantic Green New Deal: Tackling the Climate and Economic Crises. Heartened by the election of Barack Obama to the US presidency and recognizing that the US and the EU account for “a large share of the world economy,” our EU friends hoped that a Green New Deal might be the right narrative at the right time to bring the US and the EU together in a powerful transatlantic partnership to advance a postcarbon transition.4 In November of that year, the Heinrich Böll Foundation held a conference in Berlin where we discussed the potential of the Green New Deal as an overarching narrative and game plan for the upcoming Copenhagen Climate Summit several weeks later.5
That same year, the European Greens picked up the theme of a Green New Deal as the party’s political platform and published a detailed plan called A Green New Deal for Europe: Towards Green Modernisation in the Face of Crisis.6 The report was the policy document that the European Greens took into the 2009 EU elections as their playbook, and it was championed by the EU’s most prominent green leaders, Claude Turmes and Daniel Cohn-Bendit, both colleagues with whom I had worked closely over the years.
The United Nations Environment Programme (UNEP) jumped into the fray that year with a scholarly report written by Edward Barbier titled Rethinking the Economic Recovery: A Global Green New Deal.7 The report helped move the new narrative across the UN agencies and departments and quickly spread to nations around the world, bringing new players into the Green New Deal narrative.
South Korea also joined the ranks in 2009 with its own Green New Deal, signing off on a $36 billion initiative over a four-year period to build out low-carbon projects and create 960,000 new jobs, primarily in the fields of construction, rail, fuel-efficient vehicles, retrofitted buildings, and energy conservation.8
In 2011, I coauthored a book with the famed Spanish architect Enric Ruiz-Geli titled A Green New Deal: From Geopolitics to Biosphere Politics, focusing on the greening of architecture and the built environment in a climate-changing world.9
A few years later, the European Federalist Movement took the Green New Deal forward with a petition titled “New Deal 4 Europe: Campaign for a European Special Plan for Sustainable Development and Employment” and used it to launch a 2015 European-wide citizen initiative to mobilize support for a transition into a zero-carbon green economy.10 The Green New Deal narrative continued to gain momentum over the years, becoming a theme in the 2019 European elections.
Meanwhile, in the United States, “the Green New Deal” became the moniker for the US Green Party and the presidential run of Jill Stein in 2016.11
Bringing the Green New Deal up to date, Data for Progress, a think tank that provides research and polling on left-leaning issues, published its own extensive report in 2018 titled A Green New Deal: A Progressive Vision for Environmental Sustainability and Economic Stability.12 In the fall of 2018, both the fledgling Sunrise Movement and US Representative Alexandria Ocasio-Cortez joined the Green New Deal ranks with their own declaration.13
To sum up, the ground had been laid for a Green New Deal movement over a period of a decade. That movement is now coming to fruition with the ascendance of a powerful new millennial- and Gen Z–driven political revolution in both the European Union and the United States.
As noted, at the heart of the Green New Deal transition are the four sectors that make up the Second Industrial Revolution infrastructure—ICT/telecommunications; energy and electricity; internal combustion mobility and logistics; and the residential, commercial, industrial, and institutional building stock. In just the past decade, all four of these infrastructure sectors have begun to decouple from the fossil fuel civilization and recouple with green energies, clean technologies, sustainable efficiencies, and the accompanying processes of circularity and resilience that are the central features of an ecological society, leaving stranded fossil fuel assets everywhere. In 2015, Citigroup sent shockwaves through the energy industry and the global economy by predicting $100 trillion in stranded fossil fuel assets if the Paris Climate Summit succeeded in establishing a binding commitment by the nations of the world to limit global warming by 2°C.14
The mention of $100 trillion in stranded fossil fuel assets caught the attention of the global business community. Again, stranded assets are assets that have been prematurely written down before their expected life cycle runs its normal course. Stranded assets are part of the normal day-to-day operations of the market. But occasionally, an entire class of assets can suddenly and unexpectedly become stranded. This generally happens when a revolutionary new class of technologies and accompanying infrastructure platforms suddenly enter the marketplace, producing what Joseph Schumpeter termed “creative destruction,” quickly depreciating the value of existing assets, killing them off and moving them from the asset column to the liability column on the balance sheet. These types of disruptions most often characterize the great paradigm shifts in communication technology, sources of energy, modes of transport, and changes in habitats—for example, the shift from postal communication to the telephone, or from the horse and buggy to the automobile.
Stranded assets are usually a subject of interest only to accountants. However, lately the term has suddenly burst into the public arena, at least within financial circles and corporate suites, where management is witnessing an epic battle emerge, pitting the dying energies, technologies, and infrastructure of a twentieth-century fossil fuel civilization against the emerging green energies and accompanying digital technologies of a smart twenty-first-century Third Industrial Revolution.
Much of the early pioneering work in examining the trajectory and impact of stranded assets within industries and across supply chains has come from the Smith School of Enterprise and Environment, an interdisciplinary hub of the University of Oxford, and particularly the research of Ben Caldecott, who directs the Oxford Sustainable Finance Programme.
Shortly after Citigroup dropped the $100 trillion bombshell, Mark Carney, the governor of the Bank of England, informed industry leaders in a speech delivered at a Lloyd’s of London dinner that investors might be subject to “potentially huge” losses from agreed-upon climate change targets set by the nations of the world, resulting in massive reserves of oil and gas being “literally unburnable,” and stranding assets across the fossil fuel civilization. Carney cautioned that “once climate change becomes a defining issue for financial stability, it may already be too late.”15
Three years later, in 2018, the issue of stranded fossil fuel assets was no longer tied to nation-states’ climate target agreements, which, by this time, were voluntary and often not upheld. Rather, the more serious question that had now entered the public dialogue centered around the falling cost of solar and wind technologies and green power generation and storage in the marketplace, which is driving the four principal sectors of the Second Industrial Revolution to decouple from the fossil fuel infrastructure at a speed and a scale that would have been unthinkable just a few years ago, leaving potentially trillions of dollars in stranded fossil fuel assets behind and abandoned. Here’s a current look at the unfolding disruption.
When we think about which sector of the global economy uses the most energy and emits the most global warming gases, we usually tick off electricity, buildings, heat production, transportation, and maybe, as a tentative afterthought, throw agriculture into the mix. The ICT sector, which includes telecommunications, the internet, and data centers, rarely comes up. In fact, even researchers monitoring energy use and global greenhouse gas emissions seldom turn their thoughts to the ICT-related industries, as evidenced by the virtual lack of studies, at least until very recently.
Now, with the exponential rise and use of ICT devices, and especially tablets and smartphones, the introduction of more network equipment, and the proliferation of data centers, as well as the embedding of billions of sensors in the Internet of Things, the amount of sheer data being generated, stored, and sent is escalating—and along with it, the amount of electricity used in the process.
A 2018 study assessing global warming emissions’ footprint ran the numbers and found that, “if unchecked, ICT GHGE [greenhouse gas emissions] relative contribution could grow from roughly 1–1.6% in 2007 to exceed 14% of the 2016 level worldwide GHGE by 2040, accounting for half of the current relative contribution of the whole transportation sector.”16
This projection doesn’t even include—but should—the energy used and the carbon emissions in manufacturing all the electronic devices. Nor does it include the short life cycle of these devices in an industry compelled to bring a new generation of devices into the market, especially smartphones and tablets, every two years in the quest for larger profit margins. The use of energy in just the manufacturing of these devices accounts for 85–95 percent of the devices’ life-cycle annual carbon footprint.17 If we take still another step back in the ICT supply chain, the projection doesn’t include energy used and emissions emitted in extracting and processing rare earths and embedding them into devices, nor the cost of waste disposal for literally billions of devices.
Although smartphones and tablets are big players in energy use and are on a steep upward growth curve, it’s the ICT infrastructure that consumes the most energy, uses the most electricity, and emits the most greenhouse gas emissions, accounting for 70 percent of the ICT carbon footprint. And it’s the proliferation of data centers that accounts for most of the energy use and carbon footprint, which by 2020 is estimated to be near 4 percent of all of the world’s power and 45 percent of the entire ICT footprint.18 The Green New Deal agenda will have to pay close attention to the ICT sector’s decarbonization as it comes to use an increasing percentage of the global electricity being generated.
The world’s giant internet companies are leading the way in decoupling from fossil fuels and reinvesting in green energy in the ICT sector, with Apple, Google, and Facebook setting the pace. In April 2018, Apple announced that all of its data centers worldwide are now powered by renewable energy. The company also announced that twenty-three of its key manufacturing partners around the world have agreed to power all of Apple’s production with 100 percent green energy. Commenting on this milestone, Apple’s CEO, Tim Cook, said, “We’re going to keep pushing the boundaries of what is possible with the materials in our products, the way we recycle them, our facilities and our work with suppliers to establish new creative and forward-looking sources of renewable energy because we know the future depends on it.”19 Google achieved 100 percent renewable energy usage in its data centers in 2017 and is currently operating twenty renewable energy projects with a total investment of $3.5 billion in renewable energy infrastructure.20 In July 2017, Facebook announced that “all” of its new data centers from here on out will be powered by 100 percent renewable energy.21
The internet behemoths are out front in decoupling from the fossil fuel civilization, but many other leading ICT and telecom companies are running nearly apace. The numbers are significant. Microsoft and SAP have been 100 percent powered by renewable energy since 2014.22 AT&T, Intel, and Cisco, among others, are quickly integrating renewable energy into their companies’ business operations.23
Given that solar and wind are now cheaper than coal and head-to-head with oil and natural gas, and within just a few years will be far cheaper, and with the marginal cost of generating solar and wind near zero, the upfront financial commitment to decouple from fossil fuels and reinvest in renewable energies is, simply speaking, a smart business decision. Add to the equation the need to be able to secure data centers and other sensitive operations if the power grids and electricity lines go down (more likely with the increasing incidence of climate events and cyberterrorism), so that these companies’ off-grid data center facilities and other operations will remain secure.
Unbeknownst to most government leaders, a large swath of the business community, and a majority of the public, solar and wind energy generation have both been on a steeply declining exponential cost curve, not unlike the exponential curve experienced earlier by the computer industry. ENIAC, the first electronic computer, was invented at the University of Pennsylvania in 1945.24 Thomas Watson, then president of IBM, allegedly predicted that the world demand would not extend beyond five computers because of the potentially prohibitive cost. What no one could predict back then was developments in the 1970s at Intel, where engineers were successful in doubling the number of components per integrated circuit every two years, putting computer chips on a plunging exponential curve in cost. Today, over 4 billion people connect to the internet, largely due to the availability of affordable smart devices.25
Similarly, in 1977, the fixed cost per watt of silicon photovoltaic cells used in solar panels was $76; today, that cost has dropped to below 50 cents.26 Currently, power and utility companies are quietly buying long-term power generation contracts for solar for as little as 2.42 cents a kilowatt-hour.27 And according to a 2019 report released by the International Renewable Energy Agency (IRENA), onshore wind is being generated at as low as 3 to 4 cents per kilowatt-hour,28 with no end in sight in terms of the exponentially falling cost of generating the new green energies.29
The impact on society of near-zero marginal cost solar and wind energy is all the more pronounced when we consider the enormous potential of these energy sources. The sun beams 470 exajoules of energy to Earth every eighty-eight minutes—equaling the amount of energy human beings use in a year. If we could grab hold of one-tenth of 1 percent of the sun’s energy that reaches Earth, it would give us six times the energy we now use across the global economy.30 Like solar radiation, wind is ubiquitous and blows everywhere in the world—although its strength and frequency vary. A Stanford University study on global wind capacity concluded that if 20 percent of the world’s available wind were harvested, it would generate seven times more electricity than we currently use to run the entire global economy.31
According to a detailed study conducted by researchers from Stanford University and the University of California at Berkeley and published in Joule in 2017, the United States has the capacity to provide nearly 100 percent of its energy needs with renewables, with solar contributing 57.28 percent, wind contributing 38.41 percent, and the remaining 4 percent made up of hydro, wave, and geothermal.32
There are more than 3,000 electricity providers in the United States—made up of 2,000 publicly owned utilities (POUs), 187 investor-owned utilities (IOUs), 876 cooperative electric utilities (co-ops), 9 federal power agencies, and several hundred power marketers—serving 151 million customers.33
It’s no secret that the electricity sector is beginning to decouple from the fossil fuel industry in both the European Union and China, while still taking baby steps in most of America. The Renewable Energy Internet is comprised of five foundational pillars, all of which have to be phased in simultaneously for the system to operate efficiently.
First, buildings will need to be refurbished and retrofitted to make them more energy efficient so that solar energy technology can be installed to generate power for immediate use or for delivery back to the electricity grid for compensation. Second, ambitious targets must be set to replace fossil fuels and nuclear power with solar- and wind-generated energy and other renewable energy sources. To achieve this goal, incentives need to be introduced to motivate early adopters to transform buildings and property sites into micro power-generating facilities. Third, storage technologies, including batteries, hydrogen fuel cells, water pumping, etc., will need to be embedded at local generation sites and across the electricity grid to manage both the flow of intermittent green electricity and the stabilization of peak and base loads. Fourth, advanced meters and other digital technology will need to be installed in every building to transform the electricity grid from the current servomechanical operation to digital connectivity capable of managing multiple sources of green electricity flowing to the grid from local generators. The distributed smart electricity infrastructure will enable formerly passive consumers of electricity to become active managers of their own green electricity. Fifth, parking spaces will need to be equipped with charging stations to allow electric vehicles to secure power from the new Energy Internet. Millions of electric vehicles connected to the Energy Internet will also provide a storage system that can send electricity back to the grid during peak demand, when the price of electricity has spiked, while vehicle owners can be compensated for contributing their electricity to the network.
The construction of a national smart grid across the country will serve as the backbone of the Energy Internet. The Electric Power Research Institute (EPRI) provides a comprehensive definition of what makes up the national smart grid:
Today’s power system … is primarily comprised of large central-station generation connected by a high voltage network or Grid to local electric distribution systems which, in turn, serve homes, business and industry. In today’s power system, electricity flows predominantly in one direction using mechanical controls.… The Smart Grid still depends on the support of large central-station generation, but it includes a substantial number of installations of electric energy storage and of renewable energy generation facilities, both at the bulk power system level and distributed throughout. In addition, the Smart Grid has greatly enhanced sensory and control capability configured to accommodate these distributed resources as well as electric vehicles, direct consumer participation in energy management and efficient communicating appliances. This Smart Grid is hardened against cyber security while assuring long-term operations of an extremely complex system of millions of nodes.34
Back in 2011, EPRI estimated that the national smart grid and accompanying storage technology would cost upwards of $476 billion over a twenty-year period to construct but that the grid would create between $1.3 trillion and $2 trillion in overall economic benefits. EPRI also estimated that the installation of a national smart grid could cut emissions by “58 percent relative to 2005 emissions.”35
But that study was done in the very early years of the transformation of the electricity sector from fossil fuels to renewable energies and at the onset of the decoupling of electric utilities, transportation, and the building sector from fossil fuels and the recoupling to renewable sources of energy for electricity. And in 2011, electric vehicles were in their infancy, and the Internet of Things was still largely a concept and had not yet rolled out across society, connecting everything with everyone in an emerging smart digital infrastructure. There was also little discussion in 2011 about a shift from gas and oil heating to all-electric heating across the nation’s residential, commercial, industrial, and institutional building stock.
These new developments will dramatically increase the demand for electricity to power and move economic and social life which, in turn, will require ever-greater complexity in managing renewable energies and the generation of electricity coming into and out of the national grid from literally everywhere. The speed at which these changes are occurring suggests that at least the skeletal Energy Internet will need to be built out in a single decade rather than over the two decades projected by the EPRI study or else the system will not be able to handle the demands placed on it by the greater use of electricity over just the next ten years. Failure to do so will hamper and even forestall the Green New Deal transition. If that were to happen, America would not be able to reach the decarbonization target needed to meet the IPCC deadline, set in stone, to avoid tipping over the 1.5 degrees Celsius rise in the Earth’s temperature.
Moreover, the increased demands on the national grid and the growing complexity of integrating all of the components and services ups the bill for getting the national smart grid system online and operating smoothly throughout the United States.
For example, a new study published in January 2019 by the Brattle Group, a leading energy and consulting firm specializing in the energy and electricity fields, estimates that the build-out and scale-up of just the “transmission infrastructure” of the smart national power grid will cost upward of $40 billion annually between 2031 and 2050. According to a 2016 study by the National Renewable Energy Laboratory (NREL), even if solar panels were installed on every “appropriate” building in the United States, this distributed energy would only provide approximately 40 percent of the country’s current electricity demand.36 This will mean that utility-scale solar and wind generation in less-populated rural areas in the western half of the country where there is ample solar and wind will need to be brought online to send green electricity to the eastern half of the United States to complement the distributed solar and wind generated in metropolitan regions—all of which require the build-out of the high-voltage national transmission system. This investment in transmission infrastructure will be essential, according to the Brattle Group, to “ensure that the grid is robust, flexible, capable of maintaining high levels of reliability, and resilient against energy threats.”37
Other studies are projecting differing estimates for various parts of the national smart grid infrastructure that also need to be scaled. All these studies at this point in time are best-guess scenarios given the speed at which the national electricity grid is moving from a fossil fuel–based centralized system to a distributed electricity system based on potentially millions of solar- and wind-generation sites feeding in and off a smart highly digitized nationwide power grid. There will be a need to bring together all the stakeholders at the federal, state, and local levels to begin the process of fine-tuning both the prioritization of the various components of the national electricity infrastructure, their costs over time, and how they will be integrated into a nationwide operating system over a 20-year period.
The phase-in and integration of the five pillars that make up the operating platforms of the Renewable Energy Internet transform the electricity grid from a centralized to a distributed system, and from fossil fuel and nuclear generation to renewable energy. In the new system, every business, neighborhood, and homeowner becomes a potential producer of electricity, sharing their surplus with others on a smart Energy Internet that is beginning to stretch across national and continental landmasses. America’s Green New Deal will need to heed the lessons we learned in Europe and, from the get-go, ensure that all five pillars of the Renewable Energy Internet are brought together as a seamless whole or risk setbacks that will delay the successful deployment of the Third Industrial Revolution paradigm.
In Germany, the federal government established a feed-in tariff across the country to spur businesses, neighborhoods, and individuals to install solar panels and wind turbines, for which they would receive a premium price above the market price for selling their green electricity back to the grid. The incentive worked. Small and medium-sized enterprises, neighborhood associations, and farmers created electricity cooperatives, secured bank loans, and are currently generating solar and wind energy, which they are selling back to the national power grid. In 2018, all renewables claimed a 35.2 percent share of energy sources in gross German power production; nearly 25 percent of all the power was solar and wind, and much of it was being produced by small electricity cooperatives.38
Germany’s once-powerful electric utilities—E.ON, RWE, EnBW, and Vattenfall—are producing only 5 percent of the new green electricity of the twenty-first century, taking them out of the game of “generating” green electricity.39 To their credit, these companies were ideally suited to generate electricity from centralized sources of energy—coal, oil, and natural gas—which require large amounts of capital to extract, transport, and transform into electric power on the grid. The enormous capital requirements inevitably led to the erection of giant, vertically integrated business operations to create economies of scale and return profits to investors.
The new green energies, however, are distributed rather than centralized. The sun shines everywhere, and the wind blows everywhere, which means that they can be harnessed everywhere—on rooftops and along terrains—favoring literally millions of micro power-generating sites. The shift from fossil fuels to green energy is “power to the people,” both figuratively and literally, as hundreds of millions of people become producers of their own energy and electricity where they work and live. This is the beginning of the great democratization of power in communities around the world.
Critics have long argued that Germany’s love affair with renewable energy hides a darker story: the country’s continued reliance on dirty coal. The fact is, while solar and wind make up nearly 25 percent of the share of energy sources in gross German power production, and are now cheaper than coal, Germany relies on coal for more than one-third of its energy needs.40 Why is Germany still using coal? It has to do with the politics of how to bail out those regions of Germany that rely on mining coal to maintain their local economies and employments. To address this issue, a German government commission announced in January 2019 that it would embark on an ambitious plan to completely eliminate coal-generated energy over the next twenty years and, in return, compensate the coal regions with €40 billion to assist their local economies in transitioning into the green era.41 Other countries around the world that continue to rely on coal are watching the German experiment, realizing that they, too, will have to quickly phase out coal while assisting their coal-producing regions in staying on their feet.
The International Trade Union Confederation (ITUC), representing 207 million unionized workers in 331 affiliated organizations in 163 nations and territories, has drawn international attention to the need to address the plight of stranded workers and stranded communities in what is likely to be an accelerated exit from the fossil fuel civilization. The confederation has established a “Just Transition Centre” to assist stranded workforces and disadvantaged communities in embracing the new green business opportunities and mass employment in the emerging green energy economy.
Sharan Burrow, the general secretary of the International Trade Union Confederation, warns that the “sectoral and economic transformation we face is on a scale and within a timeframe faster than any in our history.”42 Fortunately, the statistics show that even in the early stages of the transition from a fossil fuel culture to a renewable energy society, green semiskilled, skilled, and professional jobs exceed employment in the conventional energy sector in many communities and regions. Burrow makes clear, however, that local and national governments need to step up and “establish just transition funds in all countries and for vulnerable communities, regions, and sectors” to cover “investment in education, reskilling and retraining; extended or expanded social protections for workers and their families; and grant, loan and seed capital programmes for diversifying community and regional economies.”43
The democratization of energy resulting from the falling costs of solar- and wind-harvesting technology, along with early adoption by newly established electricity cooperatives, has not only disrupted the fossil fuel workforce but also shaken the power-generation and electric utility industry, forcing a disruption in their business models. Many of the world’s giant power and electric utility companies are quickly decoupling from the fossil fuel industry and moving to manage the green energy being produced by millions of individuals in cooperatives while establishing a new business model of energy services for customers.
In the new energy practice, the electricity companies will mine Big Data on electricity consumption across each client’s value chains and use analytics to create algorithms and applications to help their clients increase their aggregate energy efficiency and productivity and reduce their carbon footprint and marginal cost. Their clients, in return, will share the aggregate efficiency and productivity gains with the electricity companies. Power companies will profit more from managing energy use more efficiently and selling less rather than more electricity.
In 2006, Utz Claassen, the CEO of EnBW, invited me to Germany on two separate occasions to meet with his senior staff to help lay out a strategy to transition the company out of fossil fuels and nuclear power and into the renewable energies and accompanying energy services of a Third Industrial Revolution.44 Claassen was quick to jump onboard, informing his five hundred senior employees at a mass meeting that EnBW would lead the German power and electric utility companies into the new era of postcarbon distributed renewable energy services. In 2012, EnBW announced its plan to transition from fossil fuels and nuclear power and pay more attention to renewable energies and energy services.45
In 2008, I received a similar invitation from E.ON to engage in a public discussion with its chairman, Dr. Johannes Teyssen, on the new business model for managing energy services in the emerging green society. Eight years later, E.ON split into two companies, one remaining with the legacy businesses in conventional fossil fuel energies and nuclear power and the other focusing on renewable energy services, to adjust to the disruptive changes in the German power and electric utility sector that were forcing a paradigm shift.46
Vattenfall and RWE, the other two major German power and electric utilities, have announced similar transition strategies based on the new business model that we introduced in Europe.47 German power companies, who just a decade earlier were among the unrivaled giants of the European power industry, changed course, recognizing that they were facing an old and outmoded energy regime and its accompanying infrastructure of stranded fossil fuel assets that was no longer a viable business model.
Nor were the German power companies an aberration. China has now entered the renewable energy field and currently leads the world in the manufacture and installation of solar- and wind-harvesting technology. In 2017, China accounted for more than 45 percent of the global total investment in renewable energy.48
In December 2012, the Xinhua News Agency reported that Premier Li Keqiang had read The Third Industrial Revolution and had instructed the National Development and Reform Commission and the Development Research Center of the State Council to read it and follow up with a thorough study of the ideas and themes it puts forth.49 Wang Yang, then the Communist Party secretary of Guangdong—the nation’s leading industrial hub—and a member of the Politburo, and shortly thereafter a vice premier of the country, also championed the book publicly, helping move the narrative across China between 2013 and 2018. (Wang Yang is currently number four on the hierarchy of the seven-person standing committee of the Politburo of China.) I subsequently traveled to China on four official visits in September 2013, October 2014, October 2015, and March 2016, meeting with Wang Yang and other top government officials from the National Development and Reform Commission, the Development Research Center of the State Council, the Ministry of Industry and Information Technology, and the China National Academy of Sciences to discuss the Chinese transition into a Third Industrial Revolution economy. During the first two visits, the vice premier expressed his government’s determination to ensure that China is among the leaders in deploying a green Third Industrial Revolution.
Three months after my first visit in September 2013, the government of China announced a massive financial commitment to lay out a digital Energy Internet across China, so that millions of Chinese homeowners and apartment dwellers and thousands of Chinese businesses can produce their own solar- and wind-generated green electricity in and around their residential, commercial, and industrial buildings and share surpluses with each other on the national electricity grid. The chairman of the China State Grid Corporation, Liu Zhenya, accompanied the announcement with the publication of an article titled “Smart Grid Hosting and Promoting the Third Industrial Revolution.” In the essay, Liu Zhenya described China’s ambitious plan to digitalize the electricity grid and transform it into an Energy Internet. The distributed, collaborative, peer-to-peer, and laterally scaled energy infrastructure will alter the economic life of China while establishing its commanding leadership in the next great economic revolution. The announcement made by Liu Zhenya of the decision to introduce the Energy Internet as the “intercontinental backbone network” for a new economic era represents a decisive moment in the history of China. According to Chairman Liu Zhenya, if we “can firmly grasp the historical opportunity for the Third Industrial Revolution, [it] will largely determine our position in future global competition.”50
In November 2014, President Xi Jinping surprised the world community by announcing his country’s commitment to increase the use of non–fossil fuel energies in primary energy consumption—primarily solar and wind—to 20 percent by 2030.51 Bloomberg New Energy Finance’s (BNEF) annual long-term economic analysis of the world’s power sector has China benefiting from having 62 percent of its electricity being supplied by renewables by 2050.52 This would mean that the majority of energy powering the Chinese economy would be generated at near-zero marginal cost, making China and the European Union the two most productive and competitive commercial spaces in the world.
While China followed the EU’s lead in the first generation of the solar and wind energy transition, a visionary Chinese green energy pioneer, Li Hejun, the founder and CEO of Hanergy, leaped ahead in second-generation green energy adoption, becoming the world’s number-one solar thin-film producer. In his 2015 biography, China’s New Energy Revolution, Li Hejun said that he “was deeply moved [by the] powerful set of coordinates and insights” in The Third Industrial Revolution and was particularly struck by the contention that solar energy was “more suitable for future independent and distributed production.”53
In September 2013, Li Hejun, who at the time was also the vice chairman of the powerful All-China Federation of Industry and Commerce, invited me to Beijing to share the vision, theory, and practical application of renewable energies—and the role China might play in the next great energy revolution—with twenty of China’s key policy leaders, thought leaders, and entrepreneurs. The meeting was a seminal event that helped galvanize support behind the Chinese leadership’s new commitment to establishing the green business opportunities of an ecological era.54
Fast-forward to 2018. Hanergy leads the world in thin-film solar power technologies. Its new “solar powered electric express delivery cars,” equipped with thin-film modules, are on the road and can travel 100 kilometers a day.55 The company, which holds the world record for solar efficiency at a 29.1 percent conversion rate, is also using thin film to power unmanned aerial vehicles, backpacks, umbrellas, and a range of other items, allowing individuals to carry the sun’s energy with them wherever they go to power much of what they do.56
China’s renewable energy sector already employs 3.8 million people.57 The manufacturing, installing, and servicing of solar- and wind-harvesting technology and the conversion of the country’s electricity grid from a servomechanical system operating on fossil fuels and nuclear power to a digital Renewable Energy Internet will spawn millions of additional jobs in the coming three decades.
The US power and electric utilities are just beginning to catch up to their European and Chinese counterparts. San Antonio, Texas, is America’s seventh-largest city in population, and its public electric utility, CPS Energy, is the largest municipally owned energy and electric utility in America and a prime contributor to the revenue of the city.58 In 2009, CPS Energy and the City of San Antonio invited our TIR team to collaborate on a master plan to transition the metropolitan region into the first zero-emission Third Industrial Revolution infrastructure in the United States. Our team included twenty-five experts from around the world and across the sectors of ICT, the renewable energy industry, global transport and logistics, architecture, construction, urban planning, and economic modeling and environmental design.59 Aurora Geis, the chairwoman of CPS, headed up their team, and Cris Eugster, at the time the sustainability director and now the COO of CPS, guided the day-to-day efforts.
The roadmap process took place over several months. At the time, San Antonio was pivoting between two approaches to its energy future. The company had been the first American electric utility since the nuclear reactor meltdown at Three Mile Island in 1979 to commission two nuclear power plants and had begun the planning stages toward construction before we arrived on the scene.60 CPS was also looking at an equally bold future course that would take it into wide-scale wind and solar energy generation across the state and had begun to make forays into these new energy fields as well.
There was already opposition in the city to building two nuclear power plants nearby. In addition, there was concern that the nuclear power plants might experience the kind of cost overruns that had plagued other nuclear power plant installations, jeopardizing the revenue of CPS and the city of San Antonio. CPS had commissioned a study on the potential risks of cost overruns, and the report projected the possibility that the cost could be as much as 50 percent higher than originally estimated when the commitments were signed off.
Our consulting group, at the time, urged CPS to grab hold of the green energy option. We argued that the wind potential in Texas alone could catapult the state into a green zero-emission energy future with wind being generated at near-zero marginal cost.
Texas’s claim to fame in the Second Industrial Revolution was its identification as the largest oil-producing state in the United States and, at one time, the world. We suggested that a bold shift to wind, accompanied by solar, could reposition the state as the leading renewable energy power in America in the rollout of a Third Industrial Revolution. It was during this internal conversation that CPS learned that Toshiba, the Japanese company overseeing the installation of the nuclear power plants, had just projected a cost overrun of $4 billion over the originally agreed-upon price, taking the price tag to $12 billion.61
A crisis ensued, and when the dust settled, the city and CPS bailed out of the nuclear deal with a substantial financial loss, swinging the door wide open to wind power. It turned out to be a good business decision. The current levelized minimum cost of energy (LCOE) per megawatt hour for building and operating a nuclear power facility today is $112, while, as mentioned, the minimum levelized cost for generating a megawatt of wind is $29, and utility-scale solar comes in at $40 per megawatt hour.62 Still, apparently not every power and electricity company has heeded the message. The only new nuclear power plant under construction in the United States in the past 30 years is Georgia Power’s Vogtle Electric Generating Plant. This nuclear power plant, originally contracted at $4.4 billion, is now five years behind schedule and has ballooned to a $27 billion project—a whopping cost overrun by any standard.63 It’s difficult to understand how some elected officials are still championing the construction of new nuclear power plants across the country.
In the meantime, in the past eight years, CPS Energy has been beating a path through Texas, making deals with ranchers to install wind farms across the plains. Today, ranchers around the state are enjoying a second income, hosting wind farms where the cattle roam.
Texas is currently the nation’s leading wind-generating state and has more installed capacity than all but five countries in the world. Wind generated about 15 percent of the electricity in the state in 2017, putting it on par with the current green energy generation in the European Union.64 On March 31, 2016, CPS Energy reported that 45 percent of San Antonio’s “daily energy needs … were met through wind energy generated from seven contracted farms.”65
The lesson here is that Texas accomplished most of this in less than ten years, by taking a risk and sticking to their hunch that wind power would rebrand the Lone Star State. Along with California, Texas has raised the bar and demonstrated to the other forty-eight states that they can begin playing in the same green arena, bringing America into a nearly 100 percent renewable energy regime made up of solar and wind and accompanying energy efficiencies over the course of the next two decades.
Anne Pramaggiore is another key American player leading the charge. For many years Pramaggiore has been the president and CEO of Commonwealth Edison, the giant electric utility serving Chicago, and she is now also CEO of Exelon Utilities, which, with six businesses (including ComEd) under its umbrella, is the country’s largest natural gas and electric distribution company. In 2016, Pramaggiore delivered a keynote address at the Energy Thought Summit in Austin, Texas. She mentioned that two years earlier, her company had convened a group of power-sector stakeholders to brainstorm how to make the electricity grid smarter. While many of the leading energy management companies and consultancies contributed valuable suggestions and insights, Pramaggiore felt that the effort lacked a unifying concept until she read The Third Industrial Revolution.66 Pramaggiore studied our twenty years of engagement in the European Union in introducing both the Renewable Energy Internet infrastructure for generating and managing the green energies and the new provider/user energy services business model that accompanies the paradigm shift, and she thought about how the approach might be adapted to the American electricity network.
In her presentation, Pramaggiore remarked, “It was kind of like having a jigsaw puzzle where you have all the red pieces in one corner, all the blue pieces in another corner and you can kind of see it coming together, but it’s not there. Then all of a sudden we started reading platform economics and the pieces started coming together. It made sense to us.”67 Pramaggiore is the first of a new generation of American electric utility chiefs conversant in digital platform capabilities brought to the production and distribution of renewable energies and comfortable with the new disruptive business model that will need to be put in place to move society into a zero-carbon future.
How disruptive will the transition be for the fossil fuel sector and accompanying electricity sector with the onslaught of solar and wind energy into the market? IRENA (the International Renewable Energy Agency) was commissioned by the German government to do a report on the future projections of fossil fuel production and consumption versus renewable energy production and consumption in preparation for its presidency of the G20 Summit in 2017. A part of that report ran scenarios on the potential cost of stranded assets brought on by the accelerating transformation from a fossil-fuel-driven civilization to a renewable-energy-powered society.
IRENA ran a two-timeline-scenario projection on the adoption of renewable energies and the speed of energy efficiency deployment to assess how each timeline will affect the magnitude of stranded assets across upstream energy (energy at its source), power generation, and buildings and industry, the “three large sectors that are responsible for approximately three-quarters of today’s direct global energy-related carbon dioxide emissions.” In the first scenario, called REMap, “accelerated” renewables and energy deployment from 2015 to 2050 “will deliver emission reductions that have a two out of three chance of maintaining a global temperature change below 2 degrees Celsius above pre-industrial levels.” The second case, called the “delayed policy action,” is a business-as-usual scenario until 2030 and thereafter an accelerated deployment of renewables “to ensure that the global energy system remains within the same emission budget by 2050.”68
In the delayed policy action scenario for upstream energy, were business-as-usual capital expenditures on fossil fuel energy to continue to 2030, the stranded fossil fuel assets would total approximately $7 trillion, while under the accelerated early transition REMap scenario, the stranded fossil fuel assets would come in at $3 trillion in losses. The stranded assets would represent 45–85 percent of the assumed valuation of today’s oil upstream production.69
In power generation, under the delayed scenario, fossil-fuel-related assets would total $1.9 trillion, while under the accelerated early transition REMap model, stranded fossil fuel assets would be $0.9 trillion.70
The prospect of trillions of dollars in losses is a sober reminder that when it comes to the rise and fall of great civilizations, past assets inevitably become future liabilities, imposing a bill on generations not yet here. There are times in history when new communication, energy, and mobility and logistics technology revolutions are nowhere on the horizon, leading to the collapse of a civilization. Fortunately, this time around, a powerful new green infrastructure revolution is what’s pushing the old infrastructure aside, while creating the opportunity to live more lightly and sustainably on Earth.