A core change to our fundamental economic and social model that substitutes physically moving products globally to virtually moving information about products. Where virtual presence is substituted for actual visitation and nothing is made that isn’t bought.

Like any shift in fundamental substrates, this a process of creative annihilation (as opposed to the much milder form of Schumpeter’s creative destruction we see in free markets).

The following is a very important issue that is usually not understood by those who have a naive belief in technological progress: there is a serious problem of timing in the substitution of depleted fossil fuels by renewable energy alternatives.

The problem is well explained by John Robb.

1. The problem

“One of the long term trends that now seems inexorable is that fossil fuels (stored solar) will be expensive from here on out (see my earlier attempt at this topic with “Crossing the Energy Chasm”). Demand will continuously outstrip our increasingly depleted and difficult to obtain sources of supply. Prices will rise when demand increases, and when prices rise too much, demand will be destroyed (with demand destruction starting first at the low end, as we saw with sub-prime borrowers in the US). In other words, every time we attempt to grow economically within the current model, we will bump into energy that is too expensive to support that growth.

However, there is some light at the end of the tunnel. Since we live in an adaptive system (much less adaptive than it could be due to deep structural and conceptual problems) alternatives will be found. The common assumption is that these alternatives will be in the form of direct substitutes, or new forms of inexpensive energy (presumably, fossil alternatives or solar power) that can power the existing model of the global economy. That’s likely a false assumption.

Why?

The substitutes for energy that are available, aren’t available in the quantity demanded nor at a price point necessary to serve as direct substitutes for existing sources at their historical (low) prices. Most particularly, solar power (the only source with the theoretically achievable scale to serve as a true substitute for fossil fuels) won’t be inexpensive enough to serve as a true substitute for decades.

2. The issue with solar

The reason for this is that the Moore’s law equivalent for solar power appears to be a halving underlying costs every 10.5 years (not two, like we see in the computing industry). Moore’s law has been powering productivity improvements in other industries (like biotech) at rates approaching the underlying rate of semiconductor improvement. This due to the high levels of information processing in those industries (directly addressable by improvement in computational capacity) relative to the level of improvements needed to advance the materials used. In contrast, manufacturing more efficient solar cells reverses that ratio: less information manipulation in the design and much more in terms of fundamental improvements in capacity of the materials utilized (new breakthroughs). Therefore, the rate of improvement in solar efficiency occurs much slower, even when it uses much of the same equipment used by the semi-conductor industry.

As a result, on the current doubling rate of improvement, we can’t expect to reach grid equivalence at the current prices in any reasonable scenario (sooner than 20 years). In contrast, grid equivalence at higher prices, say 10 times current prices (of electricity, which is already a premium energy source), may be achievable in the 2025 time frame. Sure, we can accelerate the share of solar energy production through the use of government subsidies and mandates (as we are currently doing), but that only shifts costs and doesn’t scale (particularly given the red ink induced pallor of our finances).

So, what does this mean?

We will likely adapt, but not in the way anticipated. The most likely adaption will come in the form of a substrate shift. A shift in the underlying model of the global economy to one that is much, much more energy efficient.

It’s a global judo move that flips everything on its back. A core change to our fundamental economic and social model that substitutes physically moving products globally to virtually moving information about products. Where virtual presence is substituted for actual visitation and nothing is made that isn’t bought.

In conclusion:

It’s a place where you telecommute to work if you sell goods and services globally. Where all production is increasingly and inexorably local, from food to energy to consumer products. It’s a place were physical travel is a premium event, reserved only for those objects and occurrences that are the most valuable. In short, localization into resilient communities (the only term I know to describe it) drives orders of magnitude improvement (10x to 100x) in the use of energy, time, space, matter, and information over the old model of globalization.

This is a must read additional but pessimistic read to the above.

Jeff Vail has a series of investigative entries on this issue as well:

Renewable energy requires an up-front investment of energy, and this may dramatically impact our ability to transition to a renewable-energy economy because the transition effort will initially exacerbate the very energy scarcity that is its impetus.

Read his contributions here: intro, 2, 3, 4