Brett Christophers: “Investment in renewables is insufficient for the transition to go at the speed we need”

The world breathed a sigh of relief when the figures were published: electricity generated from photovoltaic technology had been 29% cheaper in 2022 than that produced with the most affordable fossil fuel. An achievement that became especially evident when comparing the figures that the International Renewable Energy Agency had just released with its estimates from 2010, when the cost of photovoltaics was 710% higher.

With the cost disadvantage solved, all that was left was to sit back and wait for capitalism to unfold its magic by replacing thermal power plants with wind and solar farms. That was the general impression, but that was not what happened. In the estimates of the International Energy Agency (IEA), the year 2023 registered a 6% increase in investments aimed at expanding the supply of hydrocarbons. It is true that the money for thermal power plants has not increased in recent times, but it has not decreased either: since 2020, investors’ commitment to generating electricity with fossil fuels has remained stable, also according to the IEA.

Behind this apparent paradox there is, according to the British academic Brett Christophers (Croydon, United Kingdom, 1971), a fundamental law of capitalism and that is that it is profits that decide investments, and not the apparent advantages in the cost of production. And when it comes to returns, fossil fuels continue to win by a landslide with an average annual 15% compared to the range of between 5% and 8% attributed to renewables, Christophers explains in his book The Price is Wrong: Why Capitalism Won’t Save the Planet (published in 2024 by Verso Books, the title could be translated as “The Price Doesn’t Work: Why Capitalism Won’t Save the Planet”).

A geographer by training and professor at the Swedish University of Uppsala, Christophers has been publishing essays for several years that substantiate with data what would otherwise have remained mere intuitions about the economy, such as the privatization of 10% of British public land from the first Margaret Thatcher’s governmentThe New Enclosure, 2018); or how large investment funds have been taking over the companies that support our daily lives (Our Lives in Their Portfolios2023), from our roads to our homes, through hospitals, schools, and water and energy supplies.

Except in the case of China, where the State has played a crucial role in the financing and implementation of renewable technologies, most governments have preferred to limit their intervention to specific incentives, so that private capital is the one to resolve. alone the climate crisis, Christophers argues during a videoconference interview, “but if the pursuit of profits is the guiding principle of the private sector, limited expectations of profits necessarily mean limited investment.”

Perhaps the most surprising thing in Christophers’ thesis is precisely that: that it surprises us. We have known for a long time that the income statement is what rules, and not the production costs: how come with renewable energies we forget that elementary principle? Christophers offers three explanations. The first and simplest is that cost advantages are almost unconsciously interpreted as synonymous with greater benefits. An intuitive rule that is almost never 100% followed, he explains, and even less so in the renewable energy market.

The rule especially fails when there are a large number of generators that use renewable energy, he says. The abundance of supply forces them to compete on prices, “passing this cost advantage on to distributors, marketers and, to a greater extent, to consumers.” “It is a positive effect for consumers, and in fact it is the reason why the electricity markets have been designed this way, but it is not so positive for the generators because the difficulties in capturing the profits generated reduce their incentive to invest in technologies with higher costs.” minors,” he explains.

Another drawback is that consumer sales prices vary depending on the time of day. These prices usually rise with demand, which gives hydrocarbons an advantage, since they can be reserved for use right then. In the absence of widespread implementation of storage technologies, wind and solar energy has to be sold at the time of generation, which does not always coincide with the best sales price. “The reality is that, on average, electricity generated from renewable sources does not sell as expensive as electricity generated from fossil fuels,” explains Christophers.

And the third reason? According to Christophers, the great distances between consumption centers and renewable energy generators. This remoteness, which is explained by the need for cheap land on which to build extensive wind and solar farms, greatly increases the costs of energy distribution. “And yet, when the cost of renewables is compared to that of electricity from hydrocarbons, these distribution costs are never included, which for thermal power plants are much lower, so the comparison is completely artificial and forced” , Explain.

Availability

A possible argument is that costs can serve as indicators of the direction of investments when they refer to truly equivalent products. Until now, the comparison in which renewables seem to have gained an advantage has been between electrons: an electron generated by hydrocarbons costs more than an electron generated by the wind or the sun. But electricity is not a product but a service, and the timing of that service’s availability is as important as the number of electrons produced.

For a genuine comparison, the cost of distribution to the consumption centers and the cost of storage of renewable energy would therefore have to be included. Only in this way would the renewable generator have the same capacity as the fossil fuel generator to hold out and sell at the time of maximum prices. Would you still have that cost advantage with a comparison in those terms? “Most people won’t admit it but the answer is no,” says Christophers.

“We don’t want to talk about that because it means giving arguments to those who resist, but if governments end up subscribing to this false story that renewables are already cheaper, reality is not going to be with them.” The danger of this speech is to delegitimize a public intervention that in his opinion is key to accelerating the transition. “Renewables are growing a lot, no one doubts that, but so is the production of electricity with gas and coal,” he explains. “That trend could begin to change, with a possible first global reduction in hydrocarbon electricity this year; But even if this is the case, the planned investment in renewables is insufficient for the energy transition to go at the speed we need,” he concludes.

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