Digital Economy

Rifkin's solution: Go beyond renewables

23418877 Jeremy Rifkin Bloomberg
Jeremy Rifkin says going green is not enough. Picture source: Bloomberg

When Americans drive along a highway in rural Germany, one thing that might strike them (aside from cars racing past at 130 miles per hour) is the number of solar panels and wind farms dotting the landscape. If they stop in one of the smaller cities along the route, they might be struck by something else: Poor internet service.

For Jeremy Rifkin, an American economist and social theorist, it’s all linked together: Energy, the internet, digital manufacturing, even self-driving vehicles. It doesn’t really help companies for an economy to be successful in one but not the other.

Therein lies Germany’s problem, at least for the future. Europe’s largest economy has engineered an ambitious transition away from fossil fuels towards renewables, one that should be copied by other countries, but it has been far less daring when it comes to employing digital technologies in its economy and making internet quick and widely available. That has consequences, according to Mr. Rifkin. For example, the glut of renewable energy being produced isn’t being efficiently distributed across the country. Smart grids and smart meters are lacking.

There are political and social reasons for the disconnect, according to him. Mr. Rifkin suggested the challenges and cost of completing the energy transition have led to a certain amount of fatigue among politicians. He called on Germany’s next coalition government to redouble its efforts on the digital side.

“Angela Merkel has to take the communication internet and connect it to a totally digitized green energy internet.”

Jeremy Rifkin

“Germany is poised to be at the forefront of this historic transformation,” said Mr. Rifkin. The shift to renewables has given its economy a head start, but Chancellor Angela Merkel’s legacy will depend on whether she completes the next step: “She has to take the communication internet and connect it to a totally digitized green energy internet,” he said. “Then she has to connect the digital mobility internet to the other two internets.”

That’s easier said than done. Germany, with an environmentally-conscious population, was more willing to back a government-mandated shift towards renewables in the aftermath of the Fukushima nuclear disaster. What Germans are less willing to accept is surrendering the kind of data privacy that would allow the internet to make things more efficient. Those privacy concerns play into little things like having smart energy meters in the home, which could help improve the efficiency of the entire energy grid. Mr. Rifkin suggested the German government could get around some of these concerns by making participation voluntary.

Ms. Merkel might do well to listen to the suggestions of Mr. Rifkin, who heads the non-profit Foundation on Economic Trends. Entering her fourth (and almost certainly last) term as chancellor of Germany, she’s probably looking for a legacy project right about now.

Read the full transcript of our interview with Mr. Rifkin below.

Mr. Rifkin, is Germany lacking behind in digitization?

Unfortunately yes. I work with German politicians a lot. Germany has done an amazing job with leading the world into the energy transition. There is no doubt about it. Everyone is copying the German model to boost renewable energies. The problem is that they are not moving at the same speed in digitalizing the electricity grid to manage the distributed renewable energies flowing through the system.

How do you digitize energy?

Among other things, by installing smart meters in people’s houses as well as offices and commercial and industrial buildings. That means that energy resources can be used way more efficiently. With advanced meters and other internet of things digital technology, the electricity grid can be transformed in order to be able to manage multiple micro sources of energy flowing to the grid from local generators of renewable energy. We call it the energy internet, because it is literally the internet brought to energy.

So why isn’t German energy digitized yet?

Germany has the problem that smart meters have been frowned upon as a “Big Brother” in your house because it collects data. The advantages of these systems need to be explained a lot better. The people need to be made aware that they have an option to opt-in or opt-out of sharing personal data on their energy use. Everybody will then be covered.

Who should have explained that? Politicians or companies?

Politicians. They need to determine the regulations for opting-in or out. And they need to make sure that the terms of use are transparent. Germany has the best smart meters in the world for a very affordable price. They should use it. But that is only one step to digitization.

What are the other ones?

Let me provide historical context. Every great economic shift in history requires three elements, each of which interacts with the other to enable the system to operate as a whole: new communication technologies to more efficiently manage economic activity; new sources of energy to more efficiently power economic activity; and new modes of mobility to more efficiently move economic activity. In the 19th Century, steam-powered printing and the telegraph, abundant coal, and locomotives on national rail systems gave rise to the First Industrial Revolution. In the 20th Century, centralized electricity, the telephone, radio and television, cheap oil, and internal combustion vehicles on national road systems converged to create an infrastructure for the Second Industrial Revolution. Today, Germany is on the cusp of a digital Third Industrial Revolution – a new convergence of communication technology, new sources of energy, and new forms of mobility to manage, power, and move the economy and society.

On the cusp, but not there yet…

Germany is poised to be at the forefront of this historic transformation. It is very important for Germany to join the renewable energy internet with the digitized communication internet and the digitized mobility internet. These three internets ride atop a single platform called the internet of things that will allow German businesses and citizens to more efficiently and productively “manage,” “power,” and “move” their economic and social activity. The internet of things involves using sensors across the value chains in all different areas: farms, businesses, smart homes and automobiles, warehouses, and roads. Once everything is connected to the digital internet of things infrastructure, anybody – all the small and medium-size businesses, which are the heart of Germany – can go up on that platform. Then they can mine the big data that is available with their own analytics and create their own algorithms and apps, that will enhance their aggregate efficiency and productivity, reduce their ecological footprint and marginal costs. That will bring Germany into the digitized Third Industrial Revolution. This story has to be told.

Why is Germany digitizing too slowly?

Probably because it took the politicians so much courage to be the first in the world to move out of the old nuclear and fossil fuel energies. There was no one to copy. They had to make the mistakes and learn from the lessons. But now they have provided a framework for the green energy internet for the entire world. I am not letting them off the hook, but the energy transformation was a very courageous initiative on the part of Germany, and they might have become preoccupied. Now they have to rekindle their spirit and Chancellor Angela Merkel has to move to the next stage. She has to take the communication internet and connect it to a totally digitized green energy internet. Then she has to connect the digital mobility internet to the other two internets.

What is the role of German companies?

Most German companies are still centralized. They have to move from a capitalist market model to a capitalist network model, where they work together with other industries to help manage the flow of goods and services across the three digital internets and the internet of things infrastructure.

What would that look like in a practical example?

Cars companies like Daimler or Volkswagen attach sensors to the outside of their electrical vehicles that can collect big data on the road on traffic conditions, weather conditions, warehouse availability in real time and use the data to streamline transportation and logistics…. within a few years, those vehicles will drive autonomously. That is the beginning of the mobility internet. Now there needs to be charging stations at all the petrol stations that can provide green electricity for the electric vehicles that are now becoming available. And the telecommunications sector needs to be connected to the energy grid and the mobility internet to help manage the flow of data across the digital infrastructure. All these industries have to work together. They will not be able to go it alone.

How are politicians supposed to act on this? Are they not pushing it enough?

This is an enormous opportunity for Chancellor Merkel. This is her fourth term. She started all this. There is a legacy here for her. She wants to create a more integrated Europe, new business opportunities and jobs for all the people who feel like they have been let out. The digital smart infrastructure narrative does all of that. Virtually every industry in Germany will be involved in the build out and scale up of the smart digital infrastructure…She already said to me once, she likes this idea for Germany.

Why?

She said, Germany is a federation of regions. So this Third Industrial Revolution infrastructure which is designed to be distributed and laterally scaled fits the way Germany’s government is organized. Merkel has introduced the first level – the energy transition – now she has to put the whole narrative together..

Do you think Chancellor Merkel will be able to do that in a new governing coalition?

She understands that all the regions have to do it. Each region has to create their own roadmap for the digital transition and deploy it. This is important, because then everyone is engaged. There is no backlash. And you can scale new business opportunities. At the moment, the companies don’t scale, they do little pilot projects. This is so important, because then you can deal with the disenfranchised population. When everyone is involved in this revolution at the regional level, they will be helping to make decisions regarding the installation and deployment of the new infrastructure. Then, too, addressing extreme political movements on either side of the spectrum requires creating massive amounts of jobs.

Where would they come from?

On day one, when you start laying out the infrastructure, you create jobs. Robots and artificial intelligence cannot erect digital infrastructure. It has to be done by humans, whether it is retrofitting the buildings, installing the 5G underground cables, manufacturing and installing solar panels, windmills, advanced meters, charging stations, etc. Each region in Germany needs to set up their own roadmap and be encouraged by the federal government. Chancellor Merkel needs to tell the story as she has done so beautifully up to now with the energy transition … Merkel can create in Germany the archetype for Digital Europe / Smart Europe, which has already become the formal economic plan and infrastructure for Europe’s next half-century.

Do you think in four years’ time, Angela Merkel should be measured on the question of how she was able to deal with this?

She has the social capital to take the digital revolution and the European Union to the next stage. She has it more than anyone, because she enforced the push towards renewable energy, which began this transition into a new economic era.

Ina Karabasz is a correspondent for Handelsblatt based in Düsseldorf, covering the digital economy and telecommunications firms. Christopher Cermak, an editor with Handelsblatt Global, adapted this story for Handelsblatt Global. To contact the author: karabasz@handelsblatt.com

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