“The energy sector must be a key arena of struggle.”
One result of pandemic-driven economic shutdowns around the world is a change in patterns of energy production and use. Some – reduced energy consumption, for example – are helpful in terms of their contribution to efforts to deal with the climate crisis. But despite reports of clean skies, lower air pollution levels, and falling carbon dioxide emissions, these changes will not automatically result in a green energy transition. As Grace Blakeley pointed out in her contribution to the Blueprint, the degrowth precipitated by the pandemic “is not a solution to the climate crisis, but a dystopic vision of its outcome”.
The prospect of recovery has strengthened calls for a global Green New Deal (GND), which, according to Albena Azmanova and James K. Galbraith, “lays out a path toward energy that is renewable and sustainable, toward patterns of consumption within the carrying capacity of the planet, toward systems of mutual support, towards guaranteed jobs for those who want them and guaranteed security for all”. With the onset of the pandemic, many pushing for a GND have changed tack to focus on “green” or “just recovery”. Hundreds of grassroots organizations, for example, have endorsed a set of six principles for “just recovery”, and some local government officials have also stressed the need for a “green and just recovery”.
These calls aspire, at least in principle, to link energy justice with environmental and climate justice, ensuring equitable access to safe and affordable energy for all, while also safeguarding the rights of current and future generations to a clean environment and a livable climate (as Sharachchandra Lele describes in detail). But these ends are not automatically aligned, especially when decisions are carried out in the context of capitalist profit-seeking and colonial histories.
The effects of these tensions on and in the electricity sector are particularly important. With growing concern about climate change, the idea that renewables should be the backbone of our electricity system, once mostly confined to hardcore environmentalism, has become widely accepted, even in mainstream policy discourse. Many, including the World Bank (multiple times) and Forbes magazine, have endorsed investment in renewable technologies as a way to recover from the pandemic-induced downturn. Even the International Energy Agency (IEA), an institution whose original purpose was “to ensure the security of oil supplies”, has said that renewable energy should be “at the heart” of recovery plans.
And yet the emphasis on renewables often ignores the other dimensions of justice that should be central to any progressive energy agenda. The rapid growth of renewables has already resulted in environmental injustices, from impacts on cobalt miners in the Democratic Republic of Congo, to farmers in Bolivia affected by lithium production. Although the United Nations’ Sustainable Development Goals talk of ensuring “access to affordable, reliable and modern energy for all by 2030”, they do not take on the massive inequities of global energy consumption. In 2018, for example, the average Bangladeshi’s electricity consumption was around 400 kilowatt-hours/year for the average in 2018. The average Canadian’s was 35 times that, approximately 14,200 kilowatt-hours/year.
These injustices are only to be expected in a capitalist system that produces and thrives on inequalities of different kinds.
In the following paragraphs, we argue that the energy sector must be a key arena of struggle against these inequalities, and progressives should work together to come up with plans that balance the different kinds of justice within the ecological limits of a finite planet. But first, it is useful to have a sense of current trends and responses in the electricity industry.
Trends in the Energy Industry
In 2019, 63% of the electrical energy used around the globe was derived from fossil fuels: 36% from coal, 23% from natural gas, and 3% from oil. The fraction from coal-burning has been in the same range for over three decades; natural gas has increased from around 15% in the late 1980s to more than 23% today, and oil has declined from 11% to 3% over the same period. Overall, the fraction of fossil fuel-generated electricity has been remarkably consistent.
The significant changes have occurred in the other three major sources: hydroelectric (mostly large dams), modern renewables (solar, wind, biomass and geothermal), and nuclear power. In 2019, these constituted 15.64%, 10.39%, and 10.34% respectively. In all three, the last quarter century has involved significant change: major declines in nuclear power (down from 17.5% in 1996, the historic maximum) and hydro power (down from 18.3% in 1996), and a dramatic increase in renewables (up from 1% in 1996), which now exceeds nuclear power as an electricity source.
The pandemic has had some positive effects on these trends. In May, the US Energy Information Administration (EIA) forecast a 5% decline in total U.S. electric power generation in 2020, with coal-based electricity falling 25% and renewable sourcing rising 11%. Likewise, in the European Union and the United Kingdom, electricity generation from coal fell by 25.5% in the first three months of 2020 compared to the same period in 2019. As a result, the share of overall electricity production from renewables has increased significantly. The month of May saw even more records broken. The BBC even asked: “Could the coronavirus crisis finally finish off coal?”
The reason for the increase in renewables’ share is that once they are constructed, wind turbines and solar panels cost very little to operate since they don’t need any fuel. Existing renewable plants produce electricity at much lower cost than fossil-fueled and nuclear plants, which require coal or natural gas or uranium to generate power. With the decline in electricity demand during the pandemic, utilities shut down more costly sources first. In addition, the latter also need many more staff (part of their cost function), who often have to work in confined spaces, a particular problem during the pandemic.
Beyond these straightforward cost-based decisions, the growth in renewables capacity around the world (as opposed to the increase in the proportion of electricity generated by existing renewables plants) is primarily propelled by government policy: mandates that a certain fraction of energy must come from renewable sources, tax benefits for renewable energy projects, or regulations that electricity utilities must prioritize renewables before turning to other sources. Renewables have also benefitted from declining construction costs. Between 2010 and 2019 the cost of installing a solar photovoltaic plant fell by over 80 percent, while onshore and offshore wind fell by 40 and 29 percent respectively. As a result, new solar and wind projects areincreasinglycheaper thanexisting coal-fired plants. Even projects that include some amount of energy storage to provide electricity when the sun goes down are becoming cheaper.
Capital markets have reacted to these developments by investing vast sums in renewables. In 2019, it is estimated that “investment in renewables excluding large hydro was more than three times that in new fossil fuel plants”.Investment in renewables has outstripped nuclear power since at least 2004. These large investments in turn further reduce construction and operation costs, because investment in research and development can improve production efficiencies, and lower project financing costs as lenders come to understand the potential returns associated with the sector.
These trends, however, are far too slow relative to the rate at which we need to decarbonize the electricity system in order to mitigate climate change. As we highlighted earlier, the fraction of global electricity coming from fossil fuels has not really declined in three decades. One important reason for this mismatch is pushback from the fossil fuel industry. The pandemic may have strengthened already-existing trends in renewables, but the incumbent energy industry is fighting hard to maintain its power and privilege.
Lobbying and Government Protection for Fossil Fuels
While there is widespread agreement that governments need to increase public investment to deal with the economic downturn, who will benefit from these investments is a source of significant conflict. Fossil fuel and other energy interests have been lobbying heavily to protect their interests. In March, the Australian Energy Council (AEC), an industry association of coal-fired electricity generators, lobbied to delay changes to the country’s National Electricity Market allowing for a larger renewable energy input into the grid. The AEC claimed the plan threatened “the reliability of supply during the COVID-19 health crisis”. The Canadian Association of Petroleum Producers has demanded the federal government temporarily suspend environmental regulations during the pandemic and declare the oil and gas industry an “essential service”. Pipeline work continues, posing enormous risk to First Nations and other already-vulnerable communities and ecosystems.
Governments and financial institutions have overwhelmingly responded favourably to these demands, stepping in to protect fossil fuel and related industries. Between mid-March and mid-May 2020, the European Central Bank purchased close to €30 billion in corporate bonds, including “the injection of over €7.6 billion into fossil fuels”. South Korean government agencies have offered a 1 trillion won (USD $835 billion) emergency loan to Doosan Heavy Industries, a builder of coal-fired power plants in South Korea and other countries like Indonesia. China has issued construction permits for five large coal-powered plants.
These government bailouts reflect the political power of fossil fuel industries. But that power faces resistance from social movements. In the United States, over three hundred groups have signed a letter to members of Congress opposing fossil fuel industry bailouts, and the people’s bailout campaign has called for “public investments to…expand wind and solar power, build clean and affordable public transit, weatherize our buildings, build and repair public housing, manufacture more clean energy goods, restore our wetlands and forests, expand public services that support climate resilience, and support regenerative agriculture led by family farmers”: the “response to one existential crisis must not fuel another”. Meanwhile, pipeline battles – with recent major successes in the fights against the Dakota Access and Atlantic Coast pipelines in the US – have increased the political and economic costs of fossil fuel infrastructure.
These struggles are essential. The fossil fuel industry’s attempts to stave off its accelerating obsolescence make it clear that the obstacles to decarbonizing the energy system are primarily political. As Azmanova and Galbraith put it in their argument for a GND,“getting there requires fighting and winning a political battle” – and repelling the efforts of fossil capital to retain control of the energy market is a key part of that battle.
Financial Impacts
If we go by the Intergovernmental Panel on Climate Change’s emission scenarios, virtually very country will have to drastically reduce its carbon dioxide emissions by the middle of the century. For global anthropogenic carbon dioxide emissions to reach “net zero” (all emissions are balanced by removal), developing countries will likely have to reduce their emissions too, even though they have only contributed relatively little (with the obvious exception of China).
In any justice-based discussion, the Global North owes a huge climate debt to the Global South for all the carbon space it has colonized. Although the idea of climate debt has been rejected by developed countries, most prominently the United States, the idea that they would provide financing for climate change mitigation and adaptation has been central to the United Nations Framework Convention on Climate Change, and was reaffirmed in the Paris accord.
A significant fraction of these financial flows go toward renewable energy projects in developing countries, and total flows have been growing, doubling since 2010 to USD $21.4 billion in 2017. By comparison, developing countries’ total investment in renewables in 2017 (with the exception of China) was $50.4 billion. Although it is too early to know how the pandemic will affect investments in this specific sector, international investment is expected to decline on the whole. Should that translate to a decline in financing new energy projects, it will affect the rate of development of renewable power capacity in the Global South. There is, of course, no fundamental reason this needs to be the case. Such a decline would instead indicate the priorities of the ruling classes in the developed world, who are likely to focus on shorter term concerns as opposed to addressing climate change.
A separate challenge posed by the Covid-19 pandemic concerns energy security. The combination falling electricity demand from industrial and commercial consumers, coupled with deferred bill payments and bad debt in the domestic sector, has led to substantial reductions in electricity utilities’ revenues. This has put a strain on both their financial and operational resources, many of which have been struggling to attract capital to continue operations. Since some jurisdictions have placed moratoria on shutoffs because of the pandemic, utilities are obligated to provide supply to consumers with little certainty as to when or if bills will ultimately be paid. Unfortunately, more democratically-owned utilities, like the rural electricity cooperatives that were a hallmark of the original New Deal in the US, may have a more difficult time adapting to this situation given their limited cash reserves.
These challenges pose a deeper set of problems in the Global South, where poverty bars millions of people from electricity access. Electricity distribution companies that serve predominantly low-income households, especially but not only in some rural areas, can easily become unprofitable, and must turn to governments for support. In May, the Indian government injected Rs. 900 billion (around USD $12 billion) into its power distribution companies. This adds to three other major bailout schemes since 2000, totalling roughly Rs. 3.5 trillion.
The periodic need for these bailouts, in addition to the impact of the pandemic on consumer purchasing power, showcases the inadequacy of existing cost recovery mechanisms, which rely on rate hikes for consumers. Paradoxically, the structure of the electricity industry means that the falling cost of renewables could actually accentuate these problems, because most utilities have invested heavily in large fossil fuel or nuclear plants that could become stranded assets. All this at the same time that the pandemic has reinforced the urgency of universal accessto electricity. Focusing solely on the proliferation of renewable technologies, if they remain beholden to the profit imperative of the status quo, could readily conflict with energy justice that ensures safe, clean, and affordable energy access for all. In other words, a recovery that would secure safe and sufficient energy access for all, while also decarbonizing the energy system and mitigating the local impacts of energy production, requires rethinking even some of the more progressive funding models for energy provision, like the cooperatives established by the original New Deal’s Rural Electrification Administration.
Thinking Ahead Collectively
It is increasingly obvious to many in the mainstream that in the not-too-distant future, a lot more of our electricity – 100% to be precise – has to come from renewable sources like wind and solar power, and a lot less – zero percent – from fossil fuels and nuclear power. One might say this is a rare case of “good sense” becoming “common sense”, a common sense the pandemic has only further solidified. But as the trajectory of decarbonization and divestment thus far demonstrates, green capitalism won’t offer a solution to the challenges posed by the current political economy of energy and the entrenched political power of the fossil fuel and nuclear industries.
Real good sense cannot stop with just 100% renewable electricity. There is still a long way to go beyond that: we need to address injustice for a diversity of constituencies making legitimate claims, which may not be easily compatible. Progressives have to think collectively about the many other desirable goals, from zero local pollution (including from the manufacture of renewables) to zero inequity in access to energy that should be prioritized alongside zero emissions. Green capitalist strategies that focus only on carbon dioxide emissions while relying on market forces to drive renewable technologies are likely to exacerbate tensions between these multiple goals. These tensions are not easily resolved. Prioritizing multiple justice goals, and locating strategies to achieve them, will require a deeper democratic process.
Lindah Ddamba is a lawyer and graduate student who formerly worked with the Uganda Electricity Regulatory Authority.
Sara Nelson is a Fellow with the Intergovernmental Platform on Biodiversity and Ecosystem Services, and the Simons Postdoctoral Fellow.
M. V. Ramana, a physicist, is the Simons Chair in Disarmament, Global and Human Security and Director of the Liu Institute for Global Issues.
All three are with the School of Public Policy and Global Affairs at the University of British Columbia.
