Energy commons and the “third industrial revolution”

Jeremy Rifkin’s book on the “Third Industrial Revolution” has been out for a while, but I was thinking about the concepts and had a sudden brainstorm that seemed worth writing down.

Here are the five pillars of the third industrial revolution, according to Rifkin:

1. Shifting to renewable energy.
2. Transforming buildings to collect energy on-site.
3. Deploying energy storage on-site.
4. Transitioning to plug-in and fuel-cell electric vehicles.
5. Building an “energy internet” to connect these distributed sources of power.

These ideas are further complimented by things like 3-D printing and big data to make it easy to direct energy and resources exactly where they need to go from this massive grid.

I think that these concepts probably offer the best way out of our environmental crisis. Quite simply the only way to beat fossil fuels is to make renewable energy price-competitive and more convenient.

This is not where my criticism lies. Instead, I think we need to be cognizant of the potential socioeconomic ramifications of a wholesale switch to networked, renewable energy.

There has already been some criticism of the effect that coming technologies will bring to the workforce. For example driverless cars will massively effect the large number of people who drive for a living — approximately 3% of the US population as a whole, and close to 9% in some areas (like the Bronx). But while automation is likely to accompany the “third industrial revolution,” it is not part-and-parcel of the shift to renewables, the main subject of this post.

Nor do I follow the conservative red herring that green energy destroys jobs. There are already more clean energy jobs than oil jobs in the US.

Instead I want to focus on what the “third industrial revolution” potentially means for ownership of the means of production — in this case, ownership of energy and data.

A caveat: talking about these concepts seems somewhat ridiculous as Trump & Co. turn the US into a second-rate petrostate. Especially since we were already behind China and Europe in developing renewable energy (although grid development lags and some of those areas are now oversupplied with green power).

Nonetheless, very interesting ideas, even at a superficial level. Let’s discuss.

First, I want to point out that the “third industrial revolution” outlined above is essentially a shift back to the preindustrial energy landscape. Prior to the widespread use of coal and oil:

1. Essentially all energy was renewable. Primarily in the form of human and animal muscle, with minor inputs from wind, “biofuels” (mostly firewood), and hydro.

2–3. Energy was almost all collected and stored on-site. Primarily in the form of food and warm bodies.

4. Transport was all based in renewable energy. Again, primarily human and animal power, and wind.

Yet we’re clearly not talking about a total shift back to preindustrial conditions:

1. We’re talking about a lot more energy
2. Easier energy transmission
3. And a lot more data.

Those are big differences.

Another way of thinking about it is that energy production and use is likely to look more like the pre-industrial era — widely distributed. But energy transmission is likely to look like the late industrial era —highly networked.

This is what I want to talk about: the potential effects of combining widely distributed energy production and use with highly networked energy transmission.

Let me put this in terms of two very simple questions: who will own the energy production of the “third industrial revolution”? And who will control the energy transmission? In more specific terms: who will own all those solar panels, and wind-farms, and smart buildings, and batteries, and transmission lines, and even those electric vehicles?

There is no single answer to those questions, but I’m going to argue that the networked nature of the new grid, the centrality of information technology, and the high fixed-costs associated with building the energy infrastructure are likely to lead to centralization of control. This might mean state control. It might mean corporate monopolies. But it is very unlikely to mean “power to the people.” Let’s examine this through historical analysis of energy economies.

1. The Wood Era.

Even before coal and oil, market integration had a tendency to lead to monopolistic practices. The classic energy commons was the village woodlot where all villagers had rights to collect firewood. Contrary to the widespread conception of the tragedy of the commons, these woodlots tended to work quite well as long as they were managed by the village. But the minute wood could easily be sold outside of the village, the commons was generally in trouble, because each villager now had a motive to collect as much wood as he could sell, rather than just as much wood as he could use. People used to use the forest; now they wanted to own the forest in order to keep the profits to themselves. The profit motive led local lords to enclose these energy commons as their exclusive private property; and it led villagers to partition the energy commons into individual shares rather than a single shared resource. When commons were preserved, it was through much more clearly articulated rules, which generally entailed excluding outsiders and relying on the state for enforcement.

The outcome of these movements to privatize former commons were complex, but largely negative. Private forests were certainly more efficient than commons at producing market commodities (almost by definition). But there was an increased tendency to deplete resources and move on. Most damningly, privatization of commons tended to disenfranchise the very people who needed commons the most, especially casual laborers, outsiders, women, and the poor in general.

2. The Coal Era.

As coal came into widespread use, this disenfranchisement accelerated. Unlike wood, coal mines are concentrated in certain locations. This meant control and profits accrued to landowners who happened to have coal on their land, and not to their neighbors who happened not to have coal. The winner-take-all aspects of the resource landscape was impossible without the privatization of commons that had already started in the preindustrial period, and further accelerated this trend. It is no accident that we speak of coal barons, and not of coal commons or village coalfields.

The concentration of ownership in a few hands only increased the problems of the previous era. Coal (like wood) required substantial labor to extract, but unlike in the woods, this labor was concentrated on a single site. With the widening socio-economic gulf between mine owners and miners, coupled with unsafe working conditions, labor strife grew exponentially. It notable that the coal era was the first great ear of labor unrest, the era that birthed Marxism and anarchism, as well tamer varieties of labor union. Also, while coal concentrated profits in a few hands, it distributed costs widely — including the harms to coal miners, and pollution of air, water, and land.

3. The Oil Era.

Oil, like coal, concentrated profits in the hands of owners. But oil differed from coal (and especially wood) in its level of capitalization. Oil derricks, refineries and pipelines required substantial capital outlays, but once they were built had much lower labor needs than coal. John Rockefeller realized that by integrating refineries, he could exert much greater control of the oil industry than by merely owning oil wells. Standard Oil’s domination of the oil market gave him substantial monopolistic power over prices, and made Rockefeller the first billionaire in America, and possibly the richest individual in modern history. Control of refining and pipelines is still behind the wealth of a number of extremely powerful and sinister figures like the Koch brothers (two of the ten richest people in the world).

On the other side of the production equation, petrostates emerged that could enrich themselves with little benefit to their people. Long after the break-up of Standard Oil, major oil-producing countries like Saudi Arabia and Venezuela (and natural gas producers like Russia) use their market power as a club in international politics, often at great cost to their people. And note that four of the ten highest-revenue companies (and five of the top eleven) are oil companies (and one more is a power company).

4. The Information Era.

And now we must talk of networks. First, the rise of Microsoft, Oracle, and Apple demonstrated that control of information through software patents has great power to produce and concentrate wealth. Bill Gates is generally the richest man in the world and Oracle founder Larry Ellison is also in the top ten. The rise of internet giants like Google and Facebook has clearly demonstrated that networks have great potential to concentrate control of widely distributed information, and with it wealth. Seven of twelve richest people in the world derive their wealth from information technology. This is particularly important because the information that is the basis of much of that wealth — notably that of Google and Facebook — is our information.

Like oil and gas magnates, the silicon valley oligarchy has begun investing in politics. There is rampant speculation that Mark Zukerberg may run for president in 2020. Silicon valley investor and comic book villain Peter Thiel is considering a run for California governor.

So where does this leave us? Clean, sustainable energy production is clearly a good thing for the environment. Full stop. But it may not be a great thing for civil society. Even if energy production — and energy consumption — is widely distributed, that does not necessarily mean that green energy will have an equalizing effect on wealth and power. The energy sector is likely to be dominated by a class of super-wealthy who control it either by owning the software, or by owning the batteries and transmission networks, or even by owning production, or most likely some combination of the three.

Exhibit A: Much of the push toward the “third industrial revolution” is based on models where the users lease infrastructure from a large power distribution company. Solar power leases are a model where the solar companies essentially lease space on your roof and sell you the power at a discount. They’re promoted as a way to avoid up-front costs. While green power’s unit costs are now largely in line with those of fossil fuels (although this is highly location-dependant), its upfront costs are still high. This means that the push to leasing arrangements is likely to increase as power production seeks to expand to people who have less financial resources upfront, much as Uber has expanded its fleet by pushing drivers to lease vehicles from the company.

While the ultimate cost-benefit of a leasing model to users ultimately depends on the details, it strikes me as another bad thing. Energy leases look like yet another high-cost necessity, and another potential growth market for sub-prime lending, much like the sub-prime auto loans that may or may not cause the next financial crisis. In other words yet another way to turn the middle class into debt peons.

In short, the energy distributors are still trying to vertically integrate, much as Rockefeller did with Standard Oil.

Exhibit B: To the extent that the “third industrial revolution” depends on big data, much of the power will be controlled by those who control the data. We’ve seen that, despite the potential for web technology to distribute information more widely, commons models of information are quite marginal by comparison to 800-pound gorillas like Facebook and Google. As in the wood age the incentive to privatize commons is simply too strong for most communities to resist. As in the oil age, the power largely lies with those who own the infrastructure. And as in the information age, the infrastructure is likely to consist largely of software. Which is simply to say that the market can be integrated even more readily than its backbone of cables and transformers might suggest.

Exhibit C: The oligarchs are already investing in clean energy. Even setting aside Elon Musk’s famous turn from the web to electric cars, solar power, hyperloop trains and batteries. Bill Gates and a veritable who’s who of technology and venture capital billionaires have founded the Breakthrough Energy Coalition and its investment arm Breakthrough Energy Ventures to capitalize clean energy development. Despite its worthy goal, this is an investment that looks to ultimately turn profits.

So let’s be clear. I’m totally on-board with the development and integration of clean energy technologies. The threat of climate change, and all the other pollution and risks of fossil fuels — from extraction to transportation to use — are simply too great to ignore. And as we have seen, fossil fuels also produce oligarchs. The world economy is also in a pronounced rut that is going to require a technological leap to vault us out of it (I tend to think that the rut is the result of running out of commons to privatize and plunder, but that is best left to another post).

But even as a revolution around clean power is both necessary and desirable, we must be cognizant that these are not socially-neutral technologies. Integration of any network brings potentials for consolidation of power. The potential for abuse of that power is even greater when we are talking about the energy infrastructure. If this is coming down the pipeline (pun intended, and thanks to Trump reviving these pipelines, it may be later rather than sooner) we need to think seriously about how to keep the energy commons from being privatized.

And that is a topic for another day.