The Hydrogen Economy: The creation of the worldwide energy web and the redistribution of power on earth

Jeremy Rifkin
Author of "Hydrogen Economy", President of the Foundation on Economic Trends

Good afternoon everybody. It's a pleasure to be here with you. The great economic revolutions in history, the really great ones, occur when two things happen. The first is a basic change in the way we organize the energy of the earth. Second, a basic change in the way we communicate with each other to organize the new energy régime. The coming together, the convergence, of a new energy régime and a new communications régime, these really are the pivotal points in history. Although infrequent, when they happen, they truly are paradigmic. They are a Gestalt change.

Let me give you an example. Let's go back to ancient Sumeria, the first great agricultural civilization. Sumerians found a way to capture the Sun’s energy in cereal plants. Those plants became the prime energy mover for human history for 10,000 years - the agricultural era. When the Sumerians went to agriculture it was complicated, involving irrigation, hydraulics and mechanics. They had to know about the changing seasons. They had to deal with cultivation, harvest and storage and distribution.

The great changes in energy history are actually great changes in spatial-temporal orientation. Changes in spatial-temporal orientation quickened the pace, the speed, the flow the connectivity and the density of human exchange. When we change energy régimes, we change the density of human exchange. Technologies are an extension of our being. We inflate ourselves with technologies so that we can expropriate our surroundings, compress time and space, and exchange more densely. The locomotives extends our running legs, the computer amplifies memory, the bow and arrow extends our throwing arm. They are all keys to new communications and energy régimes. The coming together of writing and agriculture was a turning point in our species’ history. Gutenberg invents the printing press with movable type; for three centuries that invention had a social value, but not an economic value. The economic mission of the printing press did not really become clear until James Watt invented the steam engine and patented it, signaling the dawn of the Industrial Revolution.

We went down to the burial grounds of the Jurassic age and we dug up those remains and we burned them as stored energy and we greatly increased the speed and pace, the connectivity and the density of exchange. It used to be if one wanted to go from London to Manchester it took days; by the time the rails were laid down it was a matter of hours.

When we moved to the steam engine and coal, we had to have a new command-and-control mechanism to organize it because it was so complicated. In hindsight, try to imagine organizing the first Industrial Revolution with codex or with oral culture. It would have been slow and parochial, and not expansive enough in time and space to organize that new energy régime. We could not have done it without print. The telegraph and telephone preceded the internal combustion engine by a few years: it became the command-and-control mechanism for a régime ultimately based on the flow of oil.

I just want to make this point. We had a dramatic communications revolution in this past decade. Personal computers, the World Wide Web - we've actually connected the central nervous system of a billion people at the speed of light worldwide in less than 12 years.
We now have wireless communication, and we are goin-g to move to grid technology. After that, we are going to be moving into parallel computing, quantum mechanics and nanotechnology. But the point of this revolution is this: we did increase productivity with this new communication, because we thought that was its main mission, we did connect the central nervous system of a lot of human beings, but we never did really step back and ask what is the anthropological mission of this communications revolution. It can't be just about increasing traditional productivity or connecting people.

I think we are about to be on the cusp of a new convergence, and this decentralized communication revolution of the 1990s will become the command and control mechanism for the new energy régime. That new energy régime is distributed generation and hydrogen. Hydrogen - a basic element of the universe, stuff of the stars, ubiquitous, and when we harness that energy we get just pure water and heat.

How does the decentralized communication régime connect to distributed generation of energy in the first few decades of the 21st century? We have to begin to imagine the fuel cell as analogous to the personal computer; there's a direct analogy here. When we use a personal computer we are using our own information; the end-user becomes the author. We have a lot of end-users who are desirous of sharing information, and we took that science-based Internet and turn it into the global Internet, so that you and I can generate information on the personal computer and share it with a billion people. Imagine a fuel cell powered by hydrogen, and now imagine millions and millions of fuel cells by mid-century. Every home, every factory, every office, portables with every human being, 800 million automobiles and trucks, Those will be our power plants.
We - the end-users - begin to generate our own power. But then how do we share it? We're just getting to how we share the computers; it's called grid technology. We now realize that we can get the software together to connect all the personal computers, thousands of them, to do work that individual supercomputers could never do. What is the analogy to grid technology? You and I generate our hydrogen from electricity-to-hydrogen powered fuel cells. We send it back to the grid; all the energy we don't need. The problem, though, is that the grid can't handle it now, because the grid is centralized like the old communications grid. What we are going to do in the next 30 years, if we are smart enough, is reconfigure every power grid in America and every power grid in the world, using the architecture and the hardware and the software that was developed in Silicon Valley, so that when you and I generate the electricity, we will be able to send it decentralized, peer-to-peer, with all the appropriate architecture, so that we can say where it is going to go for the grid in real time.

The coming together of decentralized communication and distributed generation of hydrogen: the Third Industrial Revolution, as powerful in its impact on society as the coming together of coal, steam and rail with the print communication revolution of the nineteenth century. The coming together of decentralized communication and distributed generation of hydrogen will be as powerful as the Second Industrial Revolution: the internal combustion engine, oil, telegraph and telephone.

Unlike the other two revolutions, this will change the human equation in ways we can't even begin to imagine. We know it's decentralized and distributed; we know it's horizontal. Beyond that, we just have to guess. We went from principality to nation-state, from guild production to commodified market relations, we went from a feudal economic order to capitalism, we went from monarchy to representative government. So try to imagine what happens when we go to decentralized distributed communication and energy. We are only in the first two years of an era that should last at least two centuries, but the critical decisions are going to be laid down in the next decade.

It was Thomas Paine, the great American revolutionary, who said, "We must be free to make the world anew". What he should have said is "We more often make mistakes then not". I understand the problems associated with this technology are truly disruptive. The material development, the thermodynamic rates of efficiency are low; we still haven't worked out a distribution system. We have to redesign regulations; we have to do all sorts of things. It is a really uphill climb, correct? So what? So were steam power, coal, oil and print. So was the internal combustion engine. I have no doubt that the people in this room will help us get there, but the question is making the right choices in the next five to ten years.

If anthropologist were to look back at the 20-century, the one-word they would use to define us would be ‘oil’. Now we have three problems, all deeply tried to oil. Our ability to resolve these problems will be critical in determining whether we can make the leap to the next period in history. One of the primary factors is entropy - every engineer can tell you that economics is really about the laws of thermodynamics, how energies flow, and what the entropy bill is.
We have three crises all connected to oil: global warming, Third World debt, and the Middle East. All three of these crises are negatives that will help move this agenda. On the positive side, the banking, investment and insurance industries are asking "What is the new mission of the human race – we have stalled our global economy". Right now we are close to using more energy to shore up the waste than we are getting in value from the flow.

Global warming is the actual entropy bill. We've burned all that carbon, we've received tremendous benefit from it – incidentally, by we I mean 20% of the human race. Four-fifths of the human race has never been engaged in the gas-oil-coal era. But now we are paying that bill. The 2000 United Nations report on climate change estimated that the climate could change from 2 1/2 degrees on the low side Fahrenheit to 10 1/2 degrees on the high side. If it is the low side, we can probably adjust. If it is anything more than 5° we are in trouble; I really don't know if there are any new solutions we can bring to bear, honestly.

In Europe and America there is increasing concern about the weather; in Southeast Asia there is something called the ‘brown cloud’ crossing the Asian subcontinent - 100,000 people have died, and 200,000 more deaths are projected, along with a 10% decline in agricultural yield. The UN study said we would see more violent weather patterns; we are seeing it. They said we'd see more hurricanes; we are seeing it. They said we'd see coastal flooding and water rise; we are seeing it. They said we'd see more of the snow ranges on our high mountain peaks disappear from Kilimanjaro to the Himalayas; we're seeing it. And here's my litmus test personally: the Arctic. That's the measure I keep, because they said we are going to be free of ice in 50 years. Well, as you know, the ice is going quickly.

This could all be completely coincidental. But what if it isn't? As an example, the tree species in Yellowstone National Park cannot migrate north fast enough to keep up with climate change. So habitat disappears, and species cannot adjust. Remember, what separates us from the last ice age is only 9°F. You may recall that President Bush said he did not trust the UN report and wanted the National Academy of Sciences to do a report; the National Academy of Sciences report came to the same conclusion. His response was "I saw the bureaucracy report".
We've always been under the assumption that climate was going to change slowly a few degrees each year, and we may adjust to that like a frog in a boiling pot of water. However, that's not what you see in the geological record; what you see are tipping points. When you look at the last ice age, one third of the total temperature differential over the last 15,000 years took place in 10 years, resulting in mass extinction. If we were to measure human accomplishments to date, we may have to conclude unfortunately that the single greatest contribution has been global warming. We have affected the chemistry of the planet. In less than a hundred years.

Third World debt: Our young people in the streets protesting against globalization, who ask that Third World debt be relieved, they have to understand where that debt came from. Otherwise, even with debt relief those countries will eventually end up back in the exact same place. Economists in the 1950s and 1960s told Third World countries to "modernize your economies with oil, because it is a cheap commodity. We'll help you, with loans." None of us anticipated OPEC. In 1973, oil was trading at $3 a barrel; 12 weeks later, OPEC struck and prices quadrupled. The developed world adjusted, but the big victims here were the developing countries, an untold story. For thirty years, Third World countries have been desperately borrowing money from the IMF and the World Bank to pay for oil they can't afford. Eighty-three cents of every dollar borrowed by the Third World is going to pay the debt; they're not even getting the oil.

The combined wealth of the 356 wealthiest people at the end of the oil age equals the annual income of 40% of the human race. How is it connected to energy? Energy is the basis of power distribution in every society. All of what we make, do and distribute comes out of energy. We ended up in the twentieth century with a few dozen energy corporations and five or six hundred corporations, all connected with the energy régime.

And now the Middle East: I realize I am in Washington, a partisan town. I believe that President Bush believed in that Iraq had weapons of mass destruction. But what really bothered me was when the Secretary of Treasury said that at the second national security meeting they rolled out the oil maps. The second-largest oil reserves in the world are in Iraq. I don't see how we get out and I don't see how we stay in.

So, global warming, Third World debt and the Middle East. All this would be enough, and a great challenge for this generation, but there is another problem. We assumed that there would be enough to oil production so that we would not reach a peak in until around 2040 - for you who are not geologists, ‘peak’ is when half the oil resources have been used up. That is the peak of the of the well-known M. King Hubbert bell curve; from there on, prices should shoot through the roof. But in the last few years, the world's best geologists have been looking at the numbers again, about how much oil is in the fields. They have been using new computer models, and here's what they are saying "We may have the numbers wrong; we're not sure.” We may find that the Middle East has overstated the reserves. Now you can see what has happened with Shell Oil Co. - do you think that they're the first and the last company that is going to have to come to a new analysis of revised oil reserves?

I don't know who's right here; but then, it never dawned on me that it doesn't make any difference which group is right, the pessimists or the optimists. We are only arguing about 25 years here. It took me six months to figure that out. What they all do agree upon is that when we peak in world global oil production, two-thirds of the remaining reserves will be in the Persian Gulf. Now we begin to understand the strategic importance and the danger of US troops in the Middle East, at a time when the world needs more oil, China needs more oil and India needs more oil. The energy companies are aware of this; they're beginning to diversify their portfolios, and they are moving to natural gas. The problem is, the same studies show that natural gas shadows oil on peak production. We've already peaked in gas production in North America, and if anybody thinks that natural gas is going to be the save-all in 2025, look at the numbers again. We are building 270 natural gas fired power plants; most of the companies realize that by 2020 they can't keep the price.

There are plenty of other fossil fuels; we are not running out. There are tar sands in Canada, competitive at $12 a barrel on world markets, and they are the largest supplier of energy to the United States. There is plenty of heavy oil in Venezuela, although right now the politics make it difficult to get it out. And there's lots of coal. The problem is that these are dirtier fuels, they make CO2 – when we increase their utilization, we are reversing history. We went from wood to coal to oil to natural gas, going from dirtier fuels to cleaner fuels. Now, do we reverse history? I believe that the last half-century of fossil fuels is the dominant energy régime in history. There's a new energy régime on the horizon, and it's up to people like you in this room to find this alternative for us quickly, in the next 25 years.

The good news about hydrogen: it's ubiquitous, and there's no pollution, but you all know the bad news in this room: it's not a primary energy source; it's a carrier. You can harvest hydrogen from other sources, but then the thermodynamic bill kicks in. We can harvest hydrogen from natural gas, and most of the commercial hydrogen comes from natural gas, but natural gas is going to peak in the shadow of oil. We could use coal, and in this town is a lot of interest in using coal. Proponents of coal say that we can take the hydrogen out of coal, and then we can find a way, given enough time and money and research dollars, to sequester the CO2. This argument parallels the argument of proponents of nuclear power, who initially suggested that given enough time and money they would find a way to safely dispose of nuclear waste material. The question is, how would you find enough medium to store the volume of CO2 generated if we went to coal as our primary energy source. Then try to imagine no leaks in perpetuity – but if it does leak and you have massive leaks in a short period of time, that would be a human catastrophe.
How about nuclear power? There are three problems with nuclear power: waste disposal, liquidity and exposed spent nuclear material on site in power plants. My recommendation is: we've got to decommission those nuclear power plants.

I think there's an alternative. It's tough thermodynamically, it's not quite there. We’ve got to harness renewable energy increasingly to extract hydrogen. That means were not getting completely off fossil fuels; we should have two parallel tracks with much deeper subsidies and incentives for renewable power: wind, solar photovoltaic, hydro, geothermal and biomass. If you generate electricity from wind, photovoltaic, hydro and geothermal, the electricity flows down the line immediately; what we do with the surplus? The answer? Use the surplus to electrolyze water and store the hydrogen, and then you can use it for backup power on the grid, and you can use it at all times for power for transport.

When you're using renewables to generate electricity and hydrogen, you generate electricity twice; this is a big-time dynamic bill. With biomass, it's actually a little bit better; you can take that organic waste and harness hydrogen at the beginning of the line. The central point I want to make is this: you can't have a renewable society without hydrogen; hydrogen is not an option, it is the storage carrier for renewable energy, because the wind is not always blowing, the sun is not always shining, and the water is not always there to go over the dam. The only way we can have an increasingly reliable renewable society is to store that energy during good times, so that we can utilize the hydrogen when renewable power is not available. As a case study, look at Brazil, with an energy portfolio based ninety-two percent on renewable hydro energy. In 2001 there was a major drought in Brazil, and electricity stopped all over the country. If they had had the ability to generate and store hydrogen during the good times, they could have used that to generate backup power. Two bell curves - the cost curves for fossil fuels and nuclear – both going up. We all know the direct costs: $35 a barrel, and rising. The indirect costs we don't even want to talk about, but they're escalating even more quickly: the best examples are global warming and military security. The US government now spends more money militarily to secure the oil in the Middle East than the net value of the oil secured, and that was before the war in Iraq.

While the bell curves for coal, oil and nuclear power are going up, the curves for renewables and fuel cells are going down. Why? First, the economies of scale are just beginning to set in for some classes of renewables, particularly wind. Remember, the United Kingdom just recently took a $10 billion commitment for wind power; twenty percent of their energy is going to be renewable. Also, Moore's Law is beginning to set in, accelerating the pace of development. In addition, there are economies of scale: as more companies buy fuel cells the price will go down. Finally, there are end use efficiency considerations: a fuel cell is 2-1/2 times more efficient than an internal combustion engine.

Since the end users generating the power can cogenerate heat back, that’s dramatic - that's why you in this room are involved in fuel cell technologies, you can see the possibilities as well as the problems. We as a society haven’t focused on this. The public is way behind the researchers, and the researchers are frustrated because they don't have the green light to move as expeditiously as they would like, with all of the incentives by government and industry and academia to make it happen.

Let me give you some timetables that I think are representative: stationary fuel cells for backup generation are already beginning to happen. The companies I work with do not trust the power grid anymore because the power companies have lost so much liquidity. We've got a power grid that is falling apart, and there are no incentives to fix the grid. So companies are willing to pay a premium for backup power: sterling engines and fuel cells come to mind. As we lose confidence in the power companies because they are not building enough to meet demand, you're going to see early adopters in manufacturing and industry, and they are going to create economies of scale. For home use, it depends on psychology: what happens if there's a second or third blackout for a week each? I can't say when, but I can say that all the currents and elements are in place. In thirty-six months you're going to see portable hydrogen cartridges - Korea and Japan are ahead of us on this - to power up your cell phone or laptop for 20 to 40 days.
Finally, the automobile. The US automobile industry has spent more than $2 billion on hydrogen cars; most of my friends say that this is a trick, that the automobile companies have put money there because they don't want to deal with hybrids and CAFE standards. This view, which was set forth by the environmental community, was perhaps true until about 24 months ago, when the California Legislature passed a bill calling for zero emission vehicles in year 2009. Toyota is coming, Honda is coming, and BMW is coming to California. You can't lose California; it's the largest automobile market in the world, and the fifth largest economy in the world. The California EPA has just announced a hydrogen economy roadmap for the State of California, with benchmarks for renewables.

If you want to look at the future, consider the new Hy-wire car, designed by the Italians, engineered by the Germans, with software by Swedes and Italians and Opel. In essence, the engineers went back and reconceptualized the automobile. It runs on hydrogen; the exhaust is pure water, it has a 225 mile range, and it has a joystick instead of a steering wheel. It's a dot-com car, wired for the dot-com generation. But here is the revolution: they are not selling a car, they are selling a power plant on wheels with modular chassis. This car has a day job and a night job: they have fused power and mobility. During the day you drive the car; when you're not driving a car you plug it back into the grid. It's a power plant on wheels. If the cost of hydrogen is cheaper than the peak selling price of providing power back to the grid, then you're making money.

Now here is where we have to try to make the leap of imagination: imagine millions and millions of cars as power plants on wheels. Twenty-five percent of the auto fleet in this country plugged in to the decentralized grid, when they were not being driven, would eliminate every single power plant from Juneau, Alaska to Mexico City. It's like grid technology: if you plug in every PC you have power well in excess of the magnitude of a supercomputer - again, the convergence of decentralized communication and new architecture to make the grid sensitive, peer-to-peer, horizontal power.

Now this raises the big question: if we are generating power is the end of the line, who is going to control this revolution? We have an analogy here to the World Wide Web. What I'm saying is, when you get to decentralized communication, it is the same as decentralized energy. The question to be answered is whether the energy will be controlled from top down or from bottom up. Already in Europe producer cooperatives are being organized that say "We'll buy the fuel cells for small and medium-size businesses, and will work a deal with the power companies to run the grid."

What I'm saying is that there will be many complicated examples where bottom up will pressure top down. What we want is a win-win: there's room for the big energy companies with deep pockets to help move the technology, and pay for the R&D; there's room for the power companies to run these decentralized grids; there's room for the chemical companies to build the fuel cells we need. But there has to be a balanced system of reciprocity so that end users - the business community, small medium and large as well as residential communities - will all have more control over power in our lives.

The European Commission Rresident Romano Prodi recently noted, in describing a proposed industry-government partnership for the European Union’s energy future, that it was absolutely necessary to go toward a renewables-hydrogen future, and that non-renewables were not an answer. He said that this would be the next step after the euro: centralized currency and decentralized energy - an Aristotelian balance. The EU recognizes that, to become a major power, it has to move off carbon fuels and toward decentralized energy. The EU's mission is to have twenty-two percent of their electricity based on renewable by the year 2010, and to double that percentage by year 2020. There is a big difference between the vision being articulated and the reality on the ground, but what is important is that there is a vision.

There is a fundamental difference between the Bush hydrogen strategy and the EU vision: a lot of R&D money in the Bush program is earmarked for coal, how to extract hydrogen from coal, how to sequester CO2, and to harness nuclear power. Yes, it is true that the Department of Energy is promoting renewables, but the current federal program allocating $340 million a year for renewables is the price of one football stadium. Where is the money?

Parallel tracks: we've got to begin to use that fossil fuel and nuclear culture to wean off and de-subsidize so that we can move toward fuel cell technology with renewable generation of that hydrogen. Does it mean we give up hybrids? No, they're an absolutely essential transition technology in autos to get us to fuel cells. Does it mean we give up natural gas? No, it is a transition fuel, but we had better be working on wind and solar. If we want a positive way to move, we need to have a bold vision and the plan and architectural blueprint now to lay down an infrastructure for a renewable hydrogen economy.

For 200 years we have been living the idea that government lives to serve the people – a shared American and French idea - every person ought to have a voice, every person ought to count. The problem is the contradiction: we wanted to extend personal democracy, and now human rights, across the world, but we have been living in an energy régime that is elite and top down. The reason that globalization has failed is that only 20% of the world's population is connected. The real beneficiaries of this revolution will be people in the Third World, because they've got to get off dependence on oil. We are going to have to make sure that the technologies are cheaper, we are going to have to help our Third World friends leverage micro and macro credit to install renewable technologies. There should be solar panels wherever there is sun, on every roof, there should be wind and hydro and small hydro and geothermal and biomass. And there should be a fuel cell infrastructure. The reason people are powerless is literally that: they don't have power. Two thirds of the human race has never made a telephone call; one third has absolutely no electricity.

How do we create globalization that is just? Everybody has to be a player. If you can generate electricity, and produce goods and services locally, then you can sell them globally. Then every hamlet, village and urban area in the world can be a part of the dense re-globalization because they are trading with each other. What you folks in this room are doing is critical – if you don't lead this discussion, who will? You've got the knowledge base, you've got the wherewithal. What will your legacy be? What can you leave behind? The best legacy you can leave is to help get us off the carbon cycle. Our mission is clear: be focused on the prize - converge communications and energy - begin the great debate. Move us over the great divide from an entropy watershed to a new energy era, the best legacy you'll ever leave.