“This year has seen ever-higher prices at the pump, rebels seizing Libyan oilfields and a nuclear facility crippled in Japan. Yet few have realised that these disparate events are part of a larger unfolding drama. Our global energy economy, long-powered by fossil fuels and nuclear, is spiralling into a dangerous and unstable endgame.

In the first decade of this century, the emerging nations, led by China and India, brought one-third of the human race into the declining oil era. Global output rose and because every activity in our economy requires carbon-based energies, huge demand pressure was placed on diminished fossil fuel reserves.

When the price of oil passed the $125 per barrel mark in early 2008, the folly of constructing a civilisation on exhumed carbon deposits became clearer. Looking back, we can see that we hit peak globalisation, the outer limits of an economic system dependent on fossil fuels. By July 2008 oil had risen to $147, precipitating a slowdown in the global economy. This was the economic earthquake that signalled the passing of the oil era; the financial collapse 60 days later was merely the aftershock.

This is now happening again, sped forward by Libya and Fukushima. 2010 saw a tepid recovery, mostly to replenish exhausted inventories. But as growth resumed, oil rose too – it now hovers at about $110 – forcing up prices. Indeed, this is precisely what one would expect from an oil era entering a long, slow death throe: each time output throttles up, oil prices rebound, purchasing power drops and the economy stalls.

Of course, the oil spigot is not going to run dry tomorrow. There is still coal, tar sands, heavy oil and shale gas. But these are dirtier, more expensive and exacerbate climate change. Nor can we replace our energy infrastructure overnight. The challenge is keeping the old regime on life support long enough to lay the foundations for a new energy infrastructure, in part through energy efficiency measures taken by businesses and households trying to cut costs in response to raised prices.

What we need in the long run, however, is the equivalent of a new economic paradigm – that is, a systemic change in the way we organise economic life – to move beyond carbon and nuclear energy. And here I believe we are on the cusp of a third industrial revolution, in which internet technologies and renewable energies merge to create a powerful, new energy infrastructure.

In the coming era we will need to create an “energy internet” to enable hundreds of millions of people to produce green renewable energy in their homes, offices and factories. They can then store this energy as hydrogen and use green electricity to power their buildings, machinery and vehicles. Surplus electricity can then be shared with others, just as we now share information online.

Buildings are already being converted into micro-power plants with the installation of solar panels, vertical wind turbines, geothermal heat pumps, biomass converters, small hydro and the like. Sensors will be applied to every appliance, and software will keep owners apprised of changes in the price of electricity moment-to-moment, so that they can adjust their electricity use and sell electricity back to the grid if the price is right, making everyone an energy entrepreneur.

We can already see some of the other innovations that will be needed to move down this path. Governments around the world have recently instituted feed-in-tariffs that pay businesses and homeowners a premium price for the renewable electricity they produce and send back to the grid. Green mortgages with low interest rates that allow businesses and homeowners to “pay as you save” on energy are also becoming popular.

The new system that needs to emerge also holds the promise of fundamentally restructuring our economy. Fossil fuel energy systems favoured vertical economies of scale and giant, centralised enterprises. In contrast, the era of renewable energies will empower a multitude of small and medium sized enterprises, as well as larger companies, to share their energy with each other in networks that function more like ecosystems than markets. Just as millions share music with each other online and overpower major music companies, so millions of energy producers sharing electricity can overwhelm today’s conventional power generated by centralised power and utility companies.

As the oil era draws to a close, this vision offers the hope of a sustainable post-carbon era by mid-century and the possibility that we can avert catastrophic climate change. The question is whether we will see the economic possibilities ahead, and muster the will to get there in time.”

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