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In 2014, a consortium of Norwegian power giants set out to develop one of Norway's most ambitious wind power farms on the Fosen peninsula. Despite the continued dissent from local Sámi herders, plans were drawn up, political obstacles were cleared away, and permit was acquired. The path seemed straightforward. Indeed, the state-owned power company, Statkraft described it as going "full steam ahead." That is until 2015 hit, and with it Statkraft pushed hard on the brakes of the project- shuttering it for the foreseeable future. In an era where pundits and headlines celebrate plummeting wind and solar
prices and renewable all-time high renewable capacity, how could this happen? Bureaucracy, permitting, and seemingly the cost of materials were dealt with, so what was stopping these Norwegian power companies from building the massive project? Today we unpack the hidden obstacle behind the installation of renewables. Drawing heavily on Brett Christophers' essential book The Price is Wrong we'll untangle the mess and failure of a renewable revolution under capitalism. Traveling from the winter pastures of the Fosen Peninsula in Norway to
the board rooms of BP to understand why cheap renewables won't save us, and what's really holding us back from the rapid renewable and zero carbon transition we so desperately need. If you want to watch an ad-free version of this video, consider becoming a Nebula member. When you sign up using my link, you directly support this channel and get access to over 30 bonus and extended Our Changing Climate videos, like the speculative fiction video I just released envisioning an ecosocialist world running on 100% renewable energy 100 years in the future that you
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Where we're headed: The path ahead of us is clear. If we are to keep global temperatures below 2.0C of warming, which now is the new goal because 1.5C is pretty much locked in, no new fossil fuel infrastructure can be built. Simultaneously, the world must electrify all sectors everywhere, and build out wind and solar generation on a massive scale to support that energy consumption. In recent years, the doom of climate chaos and the immensity of the task ahead of us looks a little more promising in light of a surge in renewable development. We seem to be on the right track-
renewable construction has skyrocketed in the last two decades. Viewed from just the right angle, things seem to be working. The market has supplied the right incentives, renewables are booming, and green capitalism will pull us out of the climate crisis. Unfortunately, this ignores a dirty reality. Just as renewables are booming, so too are fossil fuels. Taken absolutely, renewable capacity has gone up, yes, but it hasn't eaten into or replaced any fossil fuels, it's just added additional power on top of them. A renewable transition is nowhere in sight… at least not yet.
But how could this be? Headlines read that the price of renewable energy has now dropped below fossil fuels. As author David Wallace Welles notes, "the I.E.A. has been calling solar the 'cheapest electricity in history' for several years now, and according to BloombergNEF, new renewable energy is now cheaper than new so-called dirty energy in 96 percent of the world's electricity markets." Looking deeper, even graphs of the levelized cost of energy, which is the average lifetime cost of generating energy, reveal that wind and solar have indeed
plummeted in price. So if renewables are the cheapest source of energy, why aren't they rapidly being adopted and replacing fossil fuels as the primary source of fuel? After all, this is what we've been told for decades was the barrier to a zero-carbon energy transition. Renewables are more costly than fossil fuels and that's why they weren't adopted. The International Energy Agency's asserted as much in a 2000 paper on the wind industry, claiming that "the primary constraint affecting [wind] development is the comparatively low cost
of conventional generation." So, now that we have reached all-time low renewable energy costs why aren't we witnessing the great renewabl transition that was promised? Don't get me wrong, renewable construction and capacity has exploded, but to be blunt, it is nowhere near the pace and size we actually need. So, what's really stopping us from a renewable transition? Renewables Aren't Profitable In 1824, the Lions of Catrine roared with power. Two massive water wheels relentlessly churned to satiate the growing demand of cotton tycoon Kirkman Finlay's factories. Despite the increasing popularity of steam power,
Finlay was enamored with water power, because unlike coal-powered steam engines, his water wheels were cheap. In a transcript from an 1833 parliamentary inquiry, Finlay reveals that his massive watermills allowed him to have "power for nothing, and in abundance." After the initial upfront cost of building the gargantuan wheels, Finlay could have cheap power at his fingertips. Indeed, during the initial stages of the U.K's Industrial Revolution, water was king. Water-powered electricity was abundant and cheap and used widely across cotton factories, and yet
by 1870, water-power was all but extinct. It was dethroned by the fossil-fueled steam engine. As Andreas Malm reveals in his book Fossil Capital, steam power, and the fossil fuels behind it, became the dominant means of producing power not because it was cheaper or more abundant than water power, but instead because coal-powered steam was much more flexible when it came to when and where it produced energy, not to mention it more easily slotted into concepts of private ownership. In essence, factory owners embraced the more expensive fossil fuel power,
because it meant greater control of their production and labor, ultimately leading to bigger profits. Malm's research reveals that we didn't adopt fossil fuels because they were cheaper, but instead, because they were more profitable for the owners of production. Fast forward to today, and the echoes of the past seem to haunt us. We are in the midst of another energy transition, except this time, it's in reverse. From fossil fuels to wind and solar. At the moment, this transition doesn't seem to be happening. Despite, wind and solar
energy now costing less than fossil fuels over their lifetime, they are not cutting into fossil fuel generation. The answer to this failure is profit. Specifically expected profit. Renewable projects are just not as profitable as other forms of fuel, and as a result, the investors that many claim would flock to the cause once prices drop, have yet to materialize. You don't have to look far into the energy sector to see this. A 2023 survey of oil, utility, and chemical executives- essentially those that have the most power when it comes to a renewable transition-
found that "four out of five executives consider the ability to create acceptable returns on projects a main barrier to decarbonization of the energy system." Meanwhile, oil majors are walking back their already paltry renewable plans for the same reason. The CEO of BP told one Wall Street Journal reporter that "he is disappointed in the returns from some of the oil giant's renewable investments," and they have subsequently stalled their renewable investments. Meanwhile, Shell pulled the brakes on its renewable investment spending in 2023. Indeed, it's telling that in
one of their most profitable years, Big Oil plowed those profits not into renewables but instead into stock buybacks. When you look at the numbers, this makes sense. According to the chief investment officer at Pickering Energy Partners via NPR, the internal rate of return for fossil fuel companies is anywhere from 20% to 50%. For wind and solar that number is a dismal 5-10%. A number that is too low for fossil capitalists to countenance. The CEO of Shell admitted as much during an earnings call with the oil company's shareholders: ["If we cannot achieve the double-digit returns in
a business, we need to question very hard whether we should continue in that business. Absolutely, we want to continue to go for lower and lower carbon, but it has to be profitable."] Why would a bank, an investor, let alone a massive fossil fuel company like Shell, invest their cash in energy generation that has an extremely high upfront cost and razor-thin return on investments when the alternative is big profits and secure returns? Under capitalism, corporations and investors are not making decisions based on the goodness of their heart,
they are doing what makes the company the most money. So 5-10% returns on a risky investment just doesn't make sense. Indeed, 5% is the amount of expected return you might get from just putting money in a bank right now. As Brett Christophers argues in an interview with Novaro Media: ["when interest rates are like 5% and you can get five six even 7% returns from sticking your money in the bank or investing it in US risk-free US government bonds why on Earth would you go to the hassle of building a wind farm with the major risk that investment
entails when there are risk-free opportunities available to make essentially the same returns."] Ultimately, energy transitions under capitalism are, as Andreas Malm argues, a series of "investment decisions, sometimes with crucial input from certain governments but rarely through democratic deliberation." This is especially the case with a renewable transition, where high upfront costs for building wind and solar farms require a lot of financing- specifically in the form of debt. Under our current capitalist system, private investors- banks, hedge funds, the financial sector- are the ones who will put up the cash for
the construction of wind and solar farms. This means that the opinions of those institutions are the most crucial for the prospects of wind and solar. So if, as we're seeing play out, investors decide not to invest in renewable construction and generation, then a zero-carbon transition will never happen under capitalism. And this is exactly what happened in 2015 with the proposed wind farm on the Fosen Peninsula. After announcing that the project was going "full steam" ahead, the time came to calculate the expected profitability of the wind farm. And with the projections came
the cold facts of capitalism. The numbers were bad. So much so that Statkraft announced in a press release that "Updated analyses… show that the projects in central Norway will not be profitable." Soon after, investors pulled out, leaving the project on the drawing-room floor. Profit, not price, then, is what we need to pay attention to when it comes to a renewable transition under capitalism. But why exactly are renewables not profitable especially when we've been told for so long that cheap renewables will mean they'll get built? Shouldn't cheaper production and construction costs translate to better profits? To answer those questions and more, we need to dive into the depths
of energy markets, the inflection point where renewable profitability is decided. The Failure of the Market: Up until the 1990s, electricity generation was a heavily state-controlled operation. Power generation, the transmission of that electricity, and its distribution were usually all controlled and operated by a government-regulated company or the state itself. As Brett Christophers explains quoting a paper on the political economy of electricity generation, ""the electricity sector was dominated by 'large-scale electricity companies' that were 'vertically integrated',
meaning that they 'owned and controlled all [industry activities] under a single roof.'" The post-WWII era saw the consolidation of various electricity generation, transmission, and into regional, in the case of the U.S. utility companies, or countrywide entities like in the case of France's Électricité de France or the Central Electricity Generating Board in the U.K. Indeed, most of the electrified world organized its grid under state-owned utilities or heavily regulated private entities. But that all changed in the 1990s. Neoliberalism and free
market ideology set their sights on electricity and tore into the sector with vicious claws. As Christophers notes this new era of energy management has been characterized by the "unbundling, de-monopolization, privatization and marketization" of the electricity sector. Notably, unbundling, or the separation of generation, transmission, and distribution into different entities, has grown substantially since 1990s. Power generation was especially hard hit by unbundling. Take, for example, the case of the United States. According to Christophers,
in 1997 "the share of independent power producers (IPPs) increased from less than 2 percent… to 42 percent by 2020." Looking more specifically at U.S. renewables, independent generators produced 80% of wind and solar energy in 2020. In short, renewable generation has become a highly privatized and unbundled endeavor. But the imperial core was not satisfied with just transforming their own energy systems. Under loan conditions and reform conditions laid about by the International Monetary Fund and World Bank, energy sectors in the periphery were forced to unbundle
and privatize their grids. The World Bank's 1993 policy paper puts it bluntly, claiming that it "will aggressively pursue the commercialization and corporatization of, and private sector participation in, developing-country power sectors." In short, the last 30-plus years of neoliberal rule have separated electricity generation into its own, privatized entity. And with the privatization and unbundling of power generation has come markets. And it's here where we can begin to see why the renewable transition is failing despite rock-bottom renewable prices.
Without getting too far in the weeds, unbundled generators sell their power through two primary markets. On wholesale markets to resellers who then resell to consumers on retail markets. This much akin to a farmer selling their produce to a grocery store then upcharges and selling it to the shopper. The wholesale market, in part, determines the profitability- or expected profitability- of renewable power generation. And many electricity markets, whether it's regional U.S. markets like the Mid-Atlantic or New England Markets, or the Nord Pool power exchange which stretches across
both Sweden and Norway, function in part as spot markets. Spot markets function to facilitate the sale of electricity available for next-day delivery. Private energy generators place bids on the spot market pledging to generate for a specific period of time, "specifying the quantity of electricity they expect to generate in that period and the price at which they are willing to sell it." These bids are then stacked from cheapest to most expensive until "pledged supply meets expected demand." Once demand is met, generators are paid out not by the price
they bid but instead by the highest-priced bid on the stack. This market structure has massive ramifications for renewable profitability. Spot markets force a race to the bottom for power producers. To assure that their energy is sold, generators must sell at the lowest price possible. Or as a primer on UK spot markets notes, "bidding higher risks not making the cut-off in the stack and hence not being able to make any income for that [settlement] period." This means that as more and more renewable generators join these markets, prices will drop. [" the
renewable energy generation sector is incredibly competitive there are thousands of entities in that market they compete purely on price selling into really competitive wholesale markets so what happens when price when cost decline well they compete those cost gains away and those cost gains get passed downstream to transmission and distribution entities and retailers and in large part."] Essentially, renewable generation markets are highly competitive, meaning that any cost efficiency that might be coming from lower price of generating are getting passed on to distribution and transmission and eventually consumers.
Not only is it a race to the bottom, but energy spot markets are highly volatile- both in the long and short term. If the sun is shining bright and the wind is blowing hard, renewable generators could satisfy all the demand of the market, and the highest-price would be extremely low because renewable generation is cheap. While on the flip side, when the sun isn't shining and it's a calm day, the price could be set by the much more expensive gas generators. This leads to wild daily fluctuations in price, resulting in spot market pricing looks like this.
In short, lower construction and generating costs of renewables don't necessarily translate to profitability because of the highly unbundled, privatized, and marketized approach to energy systems across the world. This is why banks, the financial sector, and the oil and gas industry are so hesitant to invest in renewables construction. Its volatility makes investing in renewables, whose upfront costs are 80-90% of the lifetime operating costs, a huge gamble. And when coupled with the fact that more and more renewable generators means an even more competitive market, and thus fewer and fewer profits, the investment calculus just
isn't there. ["idea that companies that are used to 15% plus returns in their core business are somehow going to make the decision to switch to businesses with returns like a third of that level is absurd it's economically madness to think that's going to happen"] In the face of this volatility and unprofitability, renewable developers and generators have increasingly relied on two different flawed paths to assuage lenders and make their projects more investible. The first is using Power Purchasing Agreements or PPAs. These agreements circumvent the volatility of markets through long-term direct contracts between
renewable generators and end users like Google or Amazon. While these agreements make renewables more attractive and safer investments, there are several pitfalls. For one, PPAs, especially in the imperial core, are primarily being adopted by Big Tech. Amazon and Google can lock in cheap renewable energy prices for their remote server warehouses and in return provide price stability for renewable developers and investors. But this means that if we were to rely heavily on PPAs to drive a renewable transition, the Amazon's of the word would be in the driver's seat-
controlling where, when, and for whom renewables are getting built. In addition, corporate PPAs as one banker notes are "finite." Linking servers and warehouses to renewable power will only take us so far. There aren't enough Amazons in the world and powering industrial warehouses alone won't cause a transition- especially if it's just powering new servers for AI computing power. Not to mention the fact that these PPAs often are adding on top of already existing fossil fuel infrastructure, not replacing it. In short, PPAs while allowing for more renewable profitability and thus
investment, fall short on the promise of spearheading an energy transition. The second path to some form of profit stability for renewables has been government subsidies and support. These look like subsidizing the cost of renewable construction through tax credits, instigating renewable purchase obligations, clean electricity certificate programs, or price control mechanisms like feed-in tariffs. To be clear, government intervention is pretty much the only reason we're seeing a noticeable uptick in renewable capacity. With a large
part of that influence coming from state-backed renewable projects and production in China, which have dramatically decreased the cost of wind and solar worldwide. The problem is that these state interventions, especially in U.S. and Europe are constantly under political threat. As a result, renewables boom as subsidies are introduced and then bust when they are scrapped. This is exactly what happened in Vietnam in 2020 when renewable construction boomed right before subsidies would expire in 2021. The introduction and subsequent lapse of government support for renewables left
Vietnamese wind and solar developers on extremely shaky ground. As Brett Christophers writes, solar and wind developers told one reporter "that they had been left '"in limbo, unclear about the future of the country's electricity procurement schemes and whether they should even stay in business'" Vietnam outlines the reality of government subsidies in the renewable market. Because solar and wind aren't profitable enough, investors don't want to touch it unless they have the certainty of subsidies. Yet that state support can often, itself be shaky and uncertain as political regimes come and go. At the end of the day, though, both PPAs and state-backed subsidies are stop-gap
interventions in a deeply hostile market system for renewables. To truly build a renewable world and escape the grasp of fossil fuels, we must move past profits and capitalist markets. Towards People Power The renewable revolution can't be predicated on profits. Privately-owned renewable generation- that is to say, a capitalist approach to a renewable sector will not work, let alone work at the speed needed to prevent catastrophic climate breakdown. The reason we're seeing any sort of uptick in renewables right now is despite, not because of, markets, privatization, and profitability. State incentives and the massive
production output of China are the primary driving forces of renewable booms. Whether it's feed-in tariffs that help stabilize volatile renewable energy pricing or direct financing of renewable construction, private companies receive billions of public dollars through policies like the Inflation Reduction Act in the U.S. to incentivize them to build renewables. So then, why don't we just cut out the middleman? If renewables are so unprofitable in our current capitalist system that we have to bend over backward and manipulate markets to such a degree
to lure in investment, why doesn't the state just start building its own renewables and enjoy the 5-10% revenue returns from them? This is exactly what New York state decided in 2023 when it passed the Build Public Renewables Act, which mandates its state-owned power company to build renewable capacity to reach the state's zero-carbon electricity goal. But this is rare in the U.S., if we need any example of what state-back renewable construction could look like, we only need to turn to countries like China. There, solar and wind capacity have skyrocketed
precisely because the corporations and banks financing the operations are either state-backed or state-owned. ["the reason that China can and is doing things at a much more rapid clip and on a much greater scale than is happening in the west is simply because it's essentially a state project"] While markets do exist in China, they are heavily controlled by the state. This has led to China installing as much wind and solar capacity in 2022 as the whole world combined. But as much as it's easy to say the imperial core needs to invest in state-owned renewable
generation that does not function on a market system, the focus of any energy transition must be on the imperial periphery. The unfortunate truth is that because of centuries of imperial plunder and predatory loan schemes the imperial periphery is in an even more tighter spot in terms of building out publicly owned renewable power: ["if you're talking about those countries in the global South that we were talking about the idea that governments in those parts of the world which are you know struggling under you know infinitely more severe fiscal constraints than the
governments of the US or Germany or the UK are going to kind of borrow cheaply on the capital markets for investment in public ownership of Renewables ain't going to happen"]. So, for any global clean energy transition to take place, the imperial periphery needs to heavily invest in state-backed renewables, and the resources for that must come from the core, with no strings attached. We need climate reparations. We need prior debt to be written off, the imperial core must pay its climate debt to peripheral countries to spur needed renewable investment. We need to reverse the plunder. At the end of the day, we need a twofold approach to energy- we need to be dramatically downscaling
energy consumption through degrowth tactics while simultaneously investing heavily in state-owned renewable capacity and generation. As we've already seen, neither of those are profitable enough for private investors. But 5-8% does mean that the government would be making money on these renewable investments- so the question of where will the money come from is ludicrous- this is not a loss, it's a gain. ["The idea of public ownership making money absolutely they it's only going to be a sinking money losing money you're talking about investing in Revenue
generating assets."] Renewable investment on the scale we need will come from placing power into the hands of the people and making decisions based not on profit but on ecology and human well-being. In the very short term, this could mean increasing and guaranteeing long-term subsidies and government support to make renewable generation and development more profitable and stable. However, that doesn't address the core problem of markets and privatization. We'd just be slapping more and more band-aids on a gushing wound, not to mention that subsidies mean we'd be
funnelling our tax dollars directly into the coffers of private owners and capitalists. Ultimately we need democratic power systems. One where we can dramatically upscale and invest in renewable generation regardless of whether they will turn a profit or not. A system where the people, not big oil corporations or venture capitalists or banks control when and where renewables get built. After all, energy and the well-being of the planet are crucial necessities for life. So why do we treat them as commodities to be bought and sold?
The only path towards this democratic power system, towards a true renewable energy transition away from fossil fuels, then, is a democratically planned economy. An ecosocialist world. But what would that democratically planned ecosocialist world look like? And how would the world function on 100% renewable energy? I set out to answer those questions with a speculative fiction video. [play clip]. You can watch that video right now exclusively on Nebula. I love telling my viewers about Nebula because I honestly think it's an amazing deal. When you sign up for Nebula,
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