After reading the recent post on Oil Supply Economics, the inelasticity seen in oil production and the subsequent spike in price strongly relates to an article written by Jeremy Rifkin entitled: Only an ‘energy internet’ can ward off disaster. In the article Mr. Rifkin describes how we have seen globalization rates peaking along with oil prices, before both are forced downward due to the inflationary pressures the higher oil has on our economy. These inflationary pressures are felt across all sectors as we are so heavily dependent on oil (energy, supply chain fuel, chemicals for product manufacturing, etc.). When globalization tries to rise too quickly, oil prices follow, causing potential financial collapse, such as in mid-2008.
Jeremy Rifkins response to this growing economic instability - not to mention the increased prevalence of global warming - is to move towards a third industrial revolution where “internet technologies and renewable energies merge to create a powerful, new energy infrastructure.” Many of us know of this energy infrastructure as the future state for a globally connected smart grid. This global connectivity allows the interconnection between multitudes of renewable energies. What I find interesting is that Mr. Rifkin isn’t calling for a complete shut-off of oil, but rather a timely transition away from carbon based fuels into the new infrastructure. As with many technology projects, there will exist a time when both the old system and the new system must both be operational, with the economy strong enough to support both, while the transition occurs. While this may sound costly and time consuming now, the pay-off is argued to be well worth it in many decades to come.
I was further able to hear Jeremy Rifkin’s discussion related to this article at a conference in Toronto, Canada back in late Q3 2011. At the conference Mr Rifkin further explained how our society today is built on concentrated energy sources (power plants), which sustain losses in distribution and transmission, and can also cripple economies when they fail. A clear example of this concentrated energy risk is Japan’s Fukushima disaster in early 2011. Instead, the new “energy internet” should allow for distributed energy in the form of renewable sources located in homes, offices, parks etc. This distributed energy can ultimately allow for increased energy network strength with decreased risk from a energy disaster.
As such, our future must be one where pressure is not only placed on utilities to expand the smart grid framework for our future energy internet, but pressure must also be placed on our society at large for this transformation to take shape. Governments can already been seen supporting the eventual shift into distributed renewable with feed-in tariffs, research grants, and carbon reduction incentives. It will take efforts on all fronts of the economy to successfully shift into the post-carbon era. I encourage readers to review the Energy 2020 plan, published by the European Commission, which Mr. Rifkin identified as the outline of how we can begin moving towards our new energy future.