The Price is Wrong: Why Capitalism Won’t Save the Planet
By Brett Christophers
Published by Verso, 2024, £22
Reviewed by Paul Kershaw
The hope of keeping global heating in check rests in large measure on the future of electricity generation. Last year was the hottest in recorded history and probably in the last 100,000 years. As The Price is Wrong argues, decarbonising electricity production is one of humanities most pressing tasks.
Electricity generation accounts for a high proportion of greenhouse gas production and electricity production is set to rise; in 2019, 37.5% of global CO2 emissions came from electricity generation. It is rising partly because of economic development but also because efforts to decarbonise other areas of economic activity – transport, industrial processes, heating etc – rest on moving to electric power on the basis of decarbonised generation.
The industry has been extensively marketised in recent years and mainstream capitalist commentators have seen the main obstacle to decarbonisation as the fact that renewable energy sources were more expensive, making it impossible to compete against fossil fuel sources without subsidies. In 2015 the International Energy Agency reported that technological improvements meant that renewable technologies, mainly solar and wind farms, were ‘no longer cost outliers’. The hope was that this would mark a turning point; subsidies for renewables could be dropped and governments could stand back as the price mechanism took over.
The promise of a turning point has not been fulfilled. For example, four years ago, capitalists were promising to build wind farms in Britain so cheaply that they wouldn’t require any public subsidy, but this proved to be a false dawn. Last year’s wind auction failed to attract any bids at all, because the subsidy on offer wasn’t high enough. Christophers doubts that any renewable generation globally is unsubsidised. As the book explains in impressive detail, the key reason is that capitalist prioritise profit, not simply lower costs.
Wael Sawain, the Shell CEO put it clearly: “Our shareholders deserve to see us going for strong returns. If we cannot achieve double digit returns in a business, we need to question very hard whether we should continue in that business. Absolutely we want to go for lower and lower carbon, but it has to be profitable”. Corporations such as Shell expect to make at least 15% returns on fossil fuel investment, but only 5-8% in renewables.
There are multiple reasons for lower profits from renewables. Crucial are the ‘unbundled’ complex of electricity markets that governments have introduced round the world. These divide the market between generation, distribution and retail, permitting competition to take place at various points in the supply chain – particularly generation. This process results in prices that are too volatile to support the upfront capital investment that renewable generators require; capitalist investors do not like uncertainty.
To counteract this, support structures must be woven into the system, from privileged market access (renewable generators receiving guaranteed fixed prices, including getting paid for not producing on days that are not especially sunny or windy) to being able to ‘socialise’ additional costs they import, such as the need for back-up generation to deal with renewables’ uncertainty. These, Christophers convincingly argues, are a feature, not a bug. Labour’s proposal to introduce a state generator, GB Energy, as a bit part player in the market, is obviously fairly useless in the light of this analysis.
The scale of the shift needed to prevent global temperatures rising by two or more degrees is huge. In 2022, 61% of global electricity supply came from fossil fuels. New coal fuelled power stations are being built at an alarming rate; an average of two per week are approved in China alone. The IEA plans to get to net zero by 2050, but that requires a rise in the contribution of wind and solar to 68%, and the virtual eradication of fossil fuel electricity generation. The remainder would be made up of other renewables such as hydropower and bioenergy, as well as nuclear. Over the same period, global electricity demand is expected to double.
The premise of the book, that the transition in electricity generation is proceeding far too slowly, has been widely accepted, but some have pointed to the rapidly rising figures for renewable generation. Christophers has convincingly rejected this idea. The growth in renewables comes mainly from China, and even there, of course, coal-fired generation is also growing. Writing in the Financial Times (21 July 2024) he explains that “debunking the ‘exponential growth’ narrative is important not just because it is misleading in so far as it mistakes a Chinese story for a global one. It is also important because the narrative is politically salient and dangerous”.
China is to some extent the exception that proves the rule. Citing another writer, Michael Davidson, Christophers writes in his book that one does not have to be an admirer of China’s political economy to see that “while Western policymakers… remain broadly convinced that they really do possess only one trick, namely deference to capital and the price mechanism, markets represent just one tool amongst many to Beijing”.
Through a detailed analysis of global electricity production Christophers demonstrates that electricity was “never a suitable object for marketisation” and only the state has “both the financial wherewithal and the logistical and administrative capacity” to deliver the trillions of dollars in annual investment in solar and wind that could keep the planet from burning up.
What social force is going to produce a move away from profit-focused generation? That issue is not dealt with, but it will be for socialists to put energy nationalisation and democratic planning at the centre of a socialist programme for the international workers’ movement.