The Necessary State: the Market Can’t Deliver the Energy Transition

A serious look at the state of global energy presents something of a double-edged sword. On one hand, 2023 was another record year for renewable installations worldwide. An estimated 507 GW (gigawatts) of new generation capacity was installed a 50 percent increase from 2022. On the other hand, according to estimates by the International Energy More

The post The Necessary State: the Market Can’t Deliver the Energy Transition appeared first on CounterPunch.org.

A serious look at the state of global energy presents something of a double-edged sword. On one hand, 2023 was another record year for renewable installations worldwide. An estimated 507 GW (gigawatts) of new generation capacity was installed a 50 percent increase from 2022. On the other hand, according to estimates by the International Energy Agency (IEA), electricity generation from coal and gas, along with total power sector CO2 emissions, continued to grow in 2023 reaching an all-time high of 17,252 TWh (Terawatt hours). The dirtiest of all fossil fuels is coal. Coal production also marked an all-time high in 2023 and the world’s most populous nations are highly dependent on it. Coal accounts for over half of India’s energy usage. China is by far the world’s largest user of coal (roughly 65 percent of China’s energy) and coal accounts much of Indonesia’s energy, where usage has doubled over the past decade. In other words, despite renewables growing fast, it isn’t happening fast enough. The IEA’s 2023 World Energy Report estimates that nearly 80 of global energy still comes from fossil fuels.

Now consider this: Over 3 billion people on the planet still live without a consistent source of electricity- in places where per-capita electricity consumption is less than 1,000 kilowatt-hours per year, or less than the amount used by a decent refrigerator. That includes about a billion people with no access to electricity at all. Average consumption per person in sub-Saharan Africa is only about 185 KWh (kilowatt-hours) a year, compared with 12,000 kWh in the U.S. and 6500 KWh in Europe. In December 2023, the World Health Organization (WHO) reported that around 2.3 billion people still cooked using open fires or with inefficient stoves powered by wood or charcoal. Such a method is more carbon-intensive than burning coal and the resulting household air pollution causes an estimated 3.2 million deaths a year (including over 237,000 children under the age of 5 in 2020).

Poverty is short for being energy-poor. Energy is saved time, reduced drudgery, healthcare, and opportunity. Global electricity demand figures to double in the next 15-20 years if not sooner. The bulk of carbon missions now are emitted by developing countries. In fact, in 2023 the world’s annual CO2 emissions increased by 398 million metric tons. China and India accounted for more than 100 percent of that increase- meaning if China and India were taken out the equation, global emissions would have actually fallen last year.

Last November, the UN reported that aid for climate adaptation in developing countries fell to $21 billion in 2021, the latest year for which comprehensive data is available. The report found that developing nations will needs between $215 billion and $387 billion annually to protect against climate shocks- that’s as much as 18 times greater than the committed amount of 2021.

It is the essence of market economics that profit be pursued above all else even if the pursuit of said profit harms society in general. Fossil fuels, due to their flexibility and energy density, largely freed our species from a dependence on the whims of Mother Nature and local geography, but greenhouse gases that are emitted from their continued use will shift the planet from the average temperature that has allowed human flourishing since the last ice age. Therefore, their use needs to be minimized as soon as possible.

Much has been made in recent times that the price of producing renewables is currently cheaper than fossil fuels. However, as Brett Christophers thoroughly explains in his new book The Price is Wrong: Why Capitalism Won’t Save the Planet, this fact overlooks the question of profit. While, Christophers explains, there is no single, consistent answer to investor returns on renewables, which vary historically and geographically, most analysis conclude that an internal rate of return of 5-8 percent is what investors on average expect and achieve (in terms of deploying the energy). Yet in the U.S. big oil and gas companies typically don’t pursue new hydrocarbon projects unless anticipated returns are at least 15 percent.

In March 2023, the Financial Times reported on a survey where over three-quarters of energy executives surveyed pointed to limited return on investment as a leading barrier to pumping money into clean energy. ‘We don’t have a shortage of capital, we have a shortage of returns’, Joe Scalise, head of Bain’s Global Energy & Natural Resources practice explained.

In the meantime, while it is certainly true that China is burning mountains of coal, China is also responsible for most of the world’s progress on renewables, including nearly 80 percent of the 50 percent increase reported by the IEA. The difference is the role of the state and planning. Nine out of 10 of China’s top wind developers are owned by the government.  In 2021, China’s President Xi Jinping announced plans for huge ‘clean energy bases’ to be built in Gobi and other desert areas by 2030. When completed these bases will have a combined capacity higher than Europe’s current total solar and wind capacity.

China also boosts an impressive capacity for building nuclear plants. Since the start of 2022, China has completed an additional five domestic reactor builds, with their completion times ranging from just under five years to just over 7 years. Countries with high Human Development Index (HDI) values that have successfully, or at least largely, decarbonized their electric grids such as Iceland, Sweden, Norway, and France have done so through a mix of hydro, geothermal, and nuclear (so have countries lower on the HDI scale such as Paraguay, Costa Rica, and Kenya). In this context, the Biden administration’s Inflation Reduction Act is a positive step. However, the public sector needs to take a much more assertive role. The largest historical drop in carbon intensity of any economy was France’s nuclear energy program of the late 1970s and early 1980s, a centralized, government-led effort.

Energy is often conflated with electricity; however, it is an oft-overlooked fact that electricity makes up only about 22 percent of energy usage worldwide. Even with the grand mission to ‘electrify everything’, the IEA generously estimates that by 2050 electricity will still only account for about half of energy usage. A majority of carbon emissions are used to produce things like concrete and steel- together they make up about 16 percent of emissions worldwide. Plastic accounts for 3-4 percent.

Before these sectors are dismissed as first-world excess, consider that one of the biggest problems for young children in poor countries is intestinal parasites. These parasites usually live in feces, which often gets brought into the home on the bottom of someone’s feet. If the home has a dirt floor, the parasites can go undetected longer and infect more children. A few years ago, when Mexico began providing families with cement to pave over dirt floors, the number of parasitic infections dropped by 78 percent. Replacing dirt tracks with paved roads has been shown to increase the wages of those living nearby by more than a quarter along with the proportion of children enrolled in school. A point well made by Ed Conway in his book Material World: The Six Raw Materials That Shape Modern Civilization, is how much steel a country has to build hospitals, as well as homes, railways and bridges can be as useful a metric as measuring GDP. The average person living in sub-Saharan Africa has less than a ton of steel per capita as opposed to 15 tons per person in rich countries. Look around a hospital and see the significance of plastic.

The ‘Haber-Bosch’ process and the synthetic ammonia fertilizer it produces is dependent on natural gas. It is responsible for around 2 percent of carbon emissions and energy expert Vaclav Smil estimates that it would be impossible to feed 40 to 50 percent of the global human population without it. What is known as Bennett’s Law posits that the consumption of protein and fat (i.e. meat) rises with people’s incomes. It has proven to be a truism thus far. Meat consumption has skyrocketed in China in recent decades. Since 1990 it has nearly doubled in Brazil. This does not figure to change any time soon. Luxuries being desirable, they change into necessities whenever possible. The Food and Agriculture Organization (FAO) estimates that consumption of beef, pork, and chicken in Africa will all increase by at least 20 percent by 2050.

There is a substantial effort being made to decarbonize and scale up greener versions of these sectors (Lab grown meat, green steel, improved recycling, etc.). Obviously, the challenge remains monumental. Public investment and planning is again critical. These are exactly the sort of public moonshots that the Left can get behind. Such public investment can be tied to required union jobs and publically-owned utilities. The point has always been abundance for all. Such remains the worthiest of goals in the midst of the energy transition.

The post The Necessary State: the Market Can’t Deliver the Energy Transition appeared first on CounterPunch.org.