The new social compact: clean and equitable energy for all

NARRATOR Welcome to the DNV Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.

MATHIAS STECK Welcome to a new episode of DNV Talks Energy here from the Global Smart Energy Summit in Dubai. Our guest today is Andy Karsner, Managing Partner of the Emerson Collective, welcome Andy.

ANDY KARSNER Thank you Mathias.

MATHIAS STECK Andy, we want to talk about the key note you gave today on this event, but we also want to talk about energy efficiency. But before we jump into this it would be great if you could introduce yourself as well as the company you’re working for. Having said this, you have worked for so many companies, it would be nice, or institutions, if you could shed some light on this as well.

ANDY KARSNER Okay, happy to do that. Well, most of my career I was a power plant developer and an energy entrepreneur. So, I used to build power stations around the world. And sometime after 9/11, through coincidences beyond my control, I became Assistant Secretary of Energy, responsible for efficiency and renewable energy, which meant that I had the responsibility for the applied science, the Federal level of our energy laboratories and our National Program, which included all the things you think about for generation transportation and efficiency. Vehicle technologies, solar, wind, geothermal, biomass and of course in the role of efficiency I was America’s top efficiency regulator. So, I had responsibly for building standards, building codes and standards, appliance standards and even contributed to CAFE Reform, our vehicle efficiency standards. And then we had voluntary programs, like Energy Star, the blue label, you might notice on energy guides, on refrigerators and so forth.

So, it was really a mixed role that led me into technology investing, really at the dawn of Cleantech and I became a venture capitalist and an entrepreneur after that, which through various iterations with private equity and venture platforms ultimately led me to what I do now, which is, I have a role in the platform of Laurene Powell Jobs, called the Emerson Collective, which is about unlocking the potential of every individual. And we do that through education and immigration reform and the area that I have some responsibility for, environment, and the nexus between communities and humanity and nature. So, that’s where we are now, I have this other role at X Labs, part of Alphabet, formerly known as Google X, where I’m a senior strategist and, as you noted, a space cowboy and that’s all about taming the wild west of energy innovation and trying to bring new technologies to bear.

MATHIAS STECK Right, great, that sounds very interesting. You also had the key note this morning here on the summit, could you share with us, what were your key messages to the audience.

ANDY KARSNER Well, it was a long key note, so there was a bunch embedded in that. I talked about crude, code and capital. Crude I meant as a proxy for natural resources, not just oil and gas, but anything that we take from nature – could be fisheries and mangroves and rainforests, and equally minerals and mining and extractives, but what are we doing in our physical world. Code, as a proxy not just for software engineering, but for all of the technology evolution and development that is scaling very rapidly now. And in particular I talked about artificial intelligence and machine learning and the role of the tech sector becoming a sector for everybody, that one had to include that in everything you do. And capital, how do we unify the relationships between technology and our natural physical world, crude and code. And I talked about the need for a new capital to be born, not just the fiat paper currencies of bread and woods, but I spoke about virtual capital and the blockchain and how that was changing the way that authenticated peer-to-peer networks were evolving markets for attributes that we could include into our trades and our transactions. I talked about natural capital, how we need true cost accounting for our impact and our footprint in nature and how virtual capital will help that. And I talked about human capital, which is not just human resources, but what does it mean to be human when the machines think faster and process better and scale more rapidly than our own capacities. And specifically, I talked about the card quote, I think therefore I am, and what does it mean when the machines can think as much and so, there’s a real need to reflect on big questions, and hopefully it was provocative for the audience.

MATHIAS STECK Right, so that maybe leads me to a follow up question there. We have discussed also around the summit here the impact of the energy transition disruption though digitalization, all points, you kind of mentioned new technologies. I saw in an earlier discussion you had on a panel that you talked about inequality to access to new technologies, to access to energy. Looking across the world we can still see that that there is a lot of inequality, do you see that these new disruptive transformations, or how we want to call them, are helping us to get more equality, with regards to having access to whatever, education, electricity, these digital advancements?

ANDY KARSNER Well, the disruptions themselves aren’t responsible; the question is how do we manage the disruptions in a thoughtful, designed manner. And that’s what I tried to impress upon the audience today, is that we are in an inevitable inexorable transition and, we have to design the outcome if we don’t want to drift there by default. And I, sort of, harkened back to that grand competition between Nikola Tesla and Thomas Edison, to light the world through different medium and platforms, just over a century ago. And what it meant at the Chicago World’s Fair when for the first time we lit up a city and turned night into day, that it was so consequential, the reverberations so great, that everybody had to stop and pause, whether they were from commerce or science or policy or politics, they had to stop and pause and say what do we do with a technological inflection of this magnitude. And what was decided then, was it was so big everybody in humanity, everybody in the human family, ought to be able to access it, it should become ubiquitous.

And so, a social compact was born that said we would always have our electrons affordable and reliable and universally available. But we have generally failed on that last one, more than 100 years later we still have up to a third of humanity that doesn’t have access.

And so the first thing to do when we move from a centralized model of monopoly distributed top down power delivery into a bottom up model, driven by technology, is to ask ourselves with a paradigm shift in the same way as we did 100 years ago, what do we do with the new social compact.? And so, I would you have to add to affordable and reliable and universally accessible, you have to add the attributes that it must be clean and it must be equitable in the diffusion of that technology. Because otherwise we’re going to stratify and polarize the comments, when in fact we need to bring people together using these technologies. And we can only do that in a thoughtfully designed way, and right now it’s not occurring that way.

MATHIAS STECK So, we also launched a report here on this event, which talks about the energy transition framework for cities. And one interesting finding was that because of the pressures cities are under due to mega-trends of urbanization and big concentration of population, that they drive now trends, or start driving trends themselves, be it sustainability, be it energy efficiency. When we talk about the drivers to move towards a more sustainable, more equal world, what do think you, where does it come from? Should Governments take stronger role there, should we leave it to the market, is it single cities, what is driving us in that direction?

ANDY KARSNER Well, I’d say yes and yes and yes, right? You can’t do, you can’t achieve the things you want to achieve without the market. The market is the most powerful prolific source of transformation that we have an opportunity to ride on the backbone of. But markets don’t make community strategy in and of themselves. So, there is an indispensable role for governance, and in particular, one would hope democratic informed governance, to guide and shape the market parameters that could yield societal outcomes that we all desire, right? That’s not working right now; we have too much political obsolescence and political dysfunction to be serving in that way. So, it really is a bit more of a free-for-all than we would like. And hopefully we can have some convergence again around thoughtful demand, thoughtful design of public sector aspiration with private market performance. So, you need both if you want to get there in an intelligent way. It doesn’t mean good things aren’t happening. At a time and in an affluent suburb, in most American cities, that anybody without permission of the utility, without permission of government, can go to a local hardware store and instantly come home with a way to take their own homes off the grid by solarizing them within weeks. And then pump that sunshine into their electric vehicles and avoid going to a gas station and do all of that cost effectively while they clean the air and feel better about their family. At a time when that can occur, it should occur in every neighborhood, not only in the neighborhoods of those with single family homes and high credit ratings. It shouldn’t be selected by market forces; it should be a thoughtful design of our public institutions to see that our communities evolve together. In the same way that all those policy makers looked at the consequence of night turning into day and said every single American home should have lights that turn on, so that families have literacy and ways to cool their food through refrigeration. We have to be that thoughtful and that deliberate about the universality of our communities’ evolution if we want that to occur.

MATHIAS STECK Right. Thank you. I’d like to take part of this to the energy efficiency space, one thing which strikes me there, the same as for renewable generation, there’s a lot of talk about energy efficiency; but different from renewable generation, where a lot of investment is going in there and we see a lot of projects coming out. At least in this part of the world and also in South East Asia, we see not much happening, there’s a lot of interest, but not much happening. On the opposite, or in the US, we still have the highest energy consumption per capita, but we see quite a big pressure on energy efficiency projects. A lot is happening. Also for us that’s a very important market. How do we explain this imbalance around the globe around that topic?

ANDY KARSNER Yes, that’s a great question. It’s usually explained with erroneous assumption, and for political reasons. And I say that because it’s, they’re very real statistically, but people don’t always grab, what the underlying basis is of the differentiation. So, if you’re promoting the sale of electrons, you’ll say, “oh it’s a marker of wealth that we have a far greater use of electrons than people, by ratio.” If you’re promoting environmental justice and you’re in India or China, you’ll say, “oh per capita consumption is so low and therefore we’re owed the opportunity to pollute as well as you did 100 years ago, so that we can bring everybody up and equal.” So, these are usually driven by different motives and different interests in different ways at different times. The truth is, it’s actually most driven by geography, by natural occurring conditions. Europe is getting warmer, several people died in a heat wave a couple of years’ back; that was unfathomable. People in the United States couldn’t understand why people were dropping like flies in France, until somebody said they don’t really have air-conditioning. And so, when you talk about energy density, right away you’ve got to say, well the United States, for whatever reasons, in its evolution at a time that energy was thought to be inexhaustible and without impact, decided it would build its major cities in Phoenix and El Paso and San Antonio and Orlando and Miami in the most inhospitable hot environments that the world has known. So, we built Disney World in the middle of a swamp and we built Las Vegas in the middle of a desert. And we, so we took it as normal, because we could electrify and bring water to those things and bring cooling.

So, that explains a lot about energy density per capita, energy intensity per capita rather, when you, when a third of your population lives in deserts, fundamentally. It doesn’t make it right or wrong, it just is. Whereas the older societies, that more usefully built on river systems and places that were more hospitable, just haven’t had central cooling. That doesn’t explain everything, it certainly doesn’t explain the questions you’ve asked about, which is waste, right? I mean, and waste is, sort of, impermissible under any circumstance, right? Why would we waste something when we could monetize instead, how do you turn a waste stream into a value stream? So, the more interesting statistic to look at than energy intensity per capita is, are we decoupling and separating the need for energy growth from economic growth? Can you create prosperity at a time that you increase efficiency and decline usage? Those are actually the lines that we want to watch the most. And too often when people think about efficiency, they’re not really thinking about efficiency, they’re thinking about conservation, they’re basically saying I’ll turn the lights off, because if they’re off I’ll use less, I’ll do less with less. But efficiency is not about doing less with less, it’s about doing more with less. So, how do you change your thermostat to a machine learning artificially intelligent device that has sensors embedded into it that with great precision are monitoring the comforts and convenience and control of your environment and sipping electrons, rather than gulping them, for the same net output and human impact. That’s efficiency, that’s where we’re going with the integration of these technologies. And the questions for this whole conference was how rapidly can we get there, and how do you do it in a secure and safe way.

MATHIAS STECK Right. So, we have also an Energy Transition Outlook in the decoupling of the energy consumption from the growth of economy; it’s something which we foresee in a couple of years down the line as well. Another interesting thought around this is this which comes under the headline of circular economy, and maybe that needs to be our closing question, looking at the time.  What do you think, again taking all these things which happened to us right now, technology improvements, people moving closer together, higher expectations to quality in life, how can a concept like the circular economy help us in that field?

ANDY KARSNER Well, I’m a great fan of circular economy, I think the phrase was really coined by my good friend Bill McDonough who wrote the book Cradle to Cradle, and the Berlin Principles at the dawn of climate negotiations. And Bill would pitch it in a very interesting way, by saying that, saying that elements in our physical sphere are just that, carbon is not the enemy, the question is are we releasing carbon into atmosphere, when we should, in a circular way, be capturing and embedding it into value streams. He would say we’re made of carbon. So, to me, if I stretch that question in the way that we examine it every day, I think of this as a problem of symbiosis – how are we, humanity, in symbiosis with nature, how do we restore, strengthen, heal the healthy harmony that is naturally designed between us and our need to perpetuate the longevity of our species and the quality of the ways we interact. That can only happen when we have healthy symbiosis with our natural habitat, and that can only happen through the design of circular economy. So, all the technological tools that we have, we have to be assertive about if they can help us reach symbiosis with the sensors and optics and measuring the treasure around us in ways that we can have an internet of natural things, in ways that we can be connected, not just amongst communities, but with communities with our nature. That’s the end state of a circular economy that breeds the healthy chances of our species, of our humanity, to prosper. And so, I hope that that’s, sort of, the net outcomes of where we’re going with all these smart devices and the energy future dialogues we’ve had here today.

MATHIAS STECK I like the internet of natural things. So, thank you very much, Andy, for these valuable insights and giving two new words, space cowboy and the internet of natural things.

ANDY KARSNER Thank you Mathias.

MATHIAS STECK Thanks for your time. And for the listeners, thank you for listening. That was Andy Karsner, Managing Partner from the Emerson Collective.

NARRATOR Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnv.com/talksenergy.