To speed the energy revolution in America, electric utilities must develop two parallel business plans – one tending its legacy business, the other capitalizing on a new era built on renewable and efficient energy.
So says Jeremy Rifkin, a prominent social thinker advising energy executives and political leaders around the world.
As a priority, utilities must now partners with “thousands and thousands" of companies eager to build their energy use around clean, efficient distributed energy, Rifkin said.
Rifkin will elaborate on his blueprint for utility and energy sector transformation when he delivers the kickoff keynote at Empowering Customers & Cities in Chicago November 1-2.
He recently talked with the Energy Times for over an hour about his vision for the future of energy. Below is an edited excerpt focused on a utility call-to-action.
ENERGY TIMES: Major utility sector changes are afoot in Germany. What can American utilities learn?
RIFKIN: About five years ago, E.On, a German power company, said, ‘Would you debate our chairman, Johannes Teyssen, in a neutral country?’ We did. We had a three-hour debate. I said, 'You need to get your business models in place for a 30-year transition from a second Industrial Revolution with centralized fossil fuel and nuclear energy. You have to keep that moving but you have to wean it down quickly. At the same time, have a parallel business model for a third Industrial Revolution. In the third Industrial Revolution model, you make more money by selling less and less electricity.' He said, ‘How do we do that?’ I said, ‘What you do is you set up partnerships with thousands and thousands of enterprises. You have to manage their energy flow on an on internet platform, helping them to mine the analytics of their big data and their energy flows. They will be able to increase their aggregate efficiencies and productivity and reduce the ecological footprint at a marginal cost. Those thousands of enterprises will share their productivity gains with the power company through performance contracts. Teyssen said at that time, ‘We will not do that.’ He did it this year. They put their fossil fuel and nuclear business into a separate company and then set up a new company for energy management exactly along the lines that I prescribed. In Germany, roughly one-third electricity is renewables and selling at a zero marginal cost. The fixed costs are plummeting. A solar watt cost $78 to produce in the late '70s. Today it is 50 cents. It will be 35 cents 18 months from now. We have power companies buying long term 20-year contracts right now at 4 cents a kilowatt hour. It's over for fossil fuel and nuclear power. Utility boards of directors worry about stranded assets.
ENERGY TIMES: So, is your recommendation that all utilities in America - large, small, rural, and urban - need to have two parallel business plans for the next 30 years?
RIFKIN: Yes. Absolutely. Right now.
EDITOR’S NOTE: To learn more about the major shift in utility business models in Germany, please consider attending Empowering Customers & Cities in Chicago, Nov. 1-2. Thomas Birr, chief strategy officer of Germany’s RWE and senior vice president of innovation & business transformation for the newly launched Innogy SE will be keynoting the executive energy conference.
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