In 2015, the British economist Nicholas Stern argued that the reason for excessive carbon emissions was not just one market failure—the familiar fact that fossil fuel prices do not include the environmental and social costs of burning them—but rather six such failures. Laid out in Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change, Stern’s fusillade of market failures cut against the prevailing case for pricing carbon, long considered a silver bullet: Get the price of carbon right, the argument went, and market actors would come up with the best and most efficient solutions without the need for policymakers to pick clean-technology winners, devise complex regulatory schemes, or otherwise micromanage the transition.
To his credit, Stern’s diagnosis of multiple market failures was an acknowledgment that climate change could not be solved in such a simple, elegant fashion. But his approach also smacked of dogmatism. In neoclassical economic theory, a properly functioning market will always produce an optimal amount of desired goods at an optimal cost—and when it fails to do so, it must be because prices have been distorted for some reason. The solution, then, is to discover the distortion, get the prices right, and allow the market to deliver the optimal amount of the desired good—in this case, clean energy.
But when one needs to invoke six market failures instead of one, it is fair to ask whether the lens of market failure is really the best or most parsimonious framework for looking at the problem. Like pre-Galilean astronomers, who produced ever more complex epicycles to describe the movement of celestial objects in order to sustain their belief that the Earth sat at the center of the universe, Stern’s proliferating cosmology of market failures was necessary to keep markets at the center of climate policy.
This, more or less, is where Brett Christophers’s new book, The Price Is Wrong: Why Capitalism Won’t Save the Planet, begins. Christophers, a geographer at Sweden’s Uppsala University, argues that getting prices right, whether by making fossil fuels expensive through pricing carbon or making clean energy cheap through subsidies and technological innovation, is entirely insufficient to drive the rapid deployment of renewable energy. Much heavier-handed intervention will be necessary, Christophers argues, including government price guarantees or even public ownership of electricity generation and distribution. The book is convincing at times in its case that neoliberal schemes to deregulate electricity markets can undermine efforts to mitigate climate change. But without intending to do so, Christophers also shows why wind and solar energy alone are unlikely to get us very far in decarbonizing the global economy.
The Price Is Wrong has been hotly anticipated. The New York Times’ David Wallace-Wells previewed it in a column in January. Robinson Meyer, an Atlantic and New York Times contributor and editor of a widely read climate newsletter, described the book as “one of the most insightful and clarifying books yet written on the relationship between climate change and capitalism.”
Readers expecting an anti-capitalist polemic, however, will be disappointed. Christophers is more wonk than firebrand, immersing his audience in an often technical description of how electricity systems have evolved, how electricity markets work, and how renewable energy projects are financed and make money. At the core of his argument is what he describes as a paradox: “[I]f renewables are now cheapest, why is government economic support for renewables still so important?” Why, he asks, “are we still in fact failing on electricity decarbonization?” The answer, he argues, is neoliberalism, the unholy fetishizing of markets as the solution to all policy problems—in this case, climate change.
The fact that renewable energy is failing to decarbonize the electricity sector may surprise many readers accustomed to breathless reports of the rapid growth of renewable energy around the world. What Christophers means by this, though, is that while renewable energy is growing rapidly in many places, these increases are not even keeping up with global growth in the demand for electricity.
Yes, wind and solar generation have grown impressively over the last decade in absolute terms. And yes, the share of global electricity generated by fossil fuels, primarily coal and gas, has fallen somewhat over that time, from around 68 percent in 2012 to around 61 percent in 2022. But total global electricity generation grew by almost 30 percent over the same period, outpacing the rise in renewables. As a result, total emissions from the power sector continued to rise.
So while the cost of renewable energy keeps falling and governments continue to pay lip service to various global climate and emissions targets, most also continue to build new coal and gas plants to power their economies—alongside all those shiny new wind turbines and solar panels.
How, Christophers asks, could this be, if wind and solar energy are as cheap as so many people say they are? His answer centers on what he believes to have been misguided policies to liberalize electricity markets. The drive to break up regulated, vertically integrated utilities and create competitive wholesale electricity markets, he argues, has disadvantaged renewable energy developers, because it forces developers to sell the electricity that they produce much of the time at fire-sale prices, as wind and solar installations often produce lots of electricity at times when it is difficult to sell it for very much. So even though the cost of producing electricity with solar and wind is often very low, it’s not profitable enough for private developers because they can’t sell it for enough to make a return on their investment.
Christophers’s analysis will, no doubt, be news to many renewable energy advocates and developers, who have long called for breaking up vertically integrated monopoly utilities to allow renewable energy producers to compete with conventional generators. The energy transition “will need to harness America’s immensely powerful and creative economic engine, not dismantle it,” Amory Lovins, America’s original renewable energy evangelist, argued in the New York Times in 2019. “We should let competition and flexibility rule our electricity system.”
Christophers attributes the move to liberalize electricity systems around the world over the last three decades to a de facto alliance between neoliberal “powers that be”—who remain undefined in the book—and renewable energy advocates who mistakenly believed that renewable energy could outcompete fossil fuels. But there is another reason that renewable energy advocates and developers have long argued for the creation of competitive wholesale electricity markets. That is because unbundling power generation, sale, and distribution also disconnects the cost of producing wind and solar energy from the cost of operating an electricity system that must deliver power to end-users whenever they need it, regardless of whether the sun is shining or the wind is blowing.
Hidebound, corrupt, and self-dealing as many of the old monopoly utilities may have been, the expectation in traditionally regulated utility systems was that in exchange for a guaranteed profit through a regulatory monopoly, they would deliver electricity to anyone who wanted it, when they wanted it, at a reasonable price. And for the most part, the monopoly utility system delivered.
These monopoly utilities have often resisted building wind and solar because, in the view of the utilities’ critics, they have perverse incentives to prioritize conventional generation using coal, gas, and uranium over renewable sources. That’s because the prevailing regulatory model pays vertically integrated utilities a set rate of profit on top of their costs, which means that utilities can raise their total profit by raising their costs—usually by overbuilding costly, capital-intensive infrastructure. But there is no reason why these incentives couldn’t, in theory, easily accommodate wind and solar power. These sources are also capital-intensive and, due to their intermittency, must be overbuilt in order to deliver significant amounts of power to the electrical grid.
There is, however, a much less sinister reason why many monopoly utilities have hesitated to add a large share of wind and solar generation to their grids. A consumer-facing utility—as opposed to a mere power producer—must consider the overall cost and complexity of operating an electrical grid that delivers power to users all the time. And from this perspective, the business case for introducing lots of capital-intensive wind and solar that often produce electricity at times when it isn’t needed has never been a strong one.
So a different answer to Christophers’s paradox is that the reason that renewable energy continues to require sustained, direct public subsidies almost everywhere, despite the falling cost to physically produce it, is that it is not actually that cheap. Yes, wind turbines and solar panels might be relatively inexpensive to manufacture and install today. But because they only produce electricity some of the time—and mostly at the same time—the value of that electricity to the grid, and hence the price it can command in competitive markets, continually declines as renewables proliferate. Christophers calls this dynamic “cannibalization.” Others call it value deflation.
The result, Christophers argues, is that nobody can make money on wind and solar despite their low installation cost without sustained public subsidies. Indeed, conventional subsidies, which in many places such as the United States are provided through investment or production tax credits that substantially lower the cost of building wind and solar generation, are not enough. Instead, he argues, continued deployment of renewable energy, consistent with significantly cutting emissions from the electricity sector, will require guaranteeing a profit to renewable energy developers..
Notably, these are not temporary measures that will go away as renewable energy becomes ever cheaper to build. Rather, he argues, the only way to incentivize developers to continue to build more wind and solar, even though they can’t make money doing so if power is priced by the market, is to guarantee them a profit, essentially in perpetuity. Whereas the old, regulated utility system guaranteed utilities a profit to deliver electricity to end-users when they needed it, Christophers suggests that solving climate change will require guaranteeing profits to renewable energy developers to deliver power when those end-users don’t need it.
This is, more or less, what Germany has done over the last two decades. That nation’s vaunted Energiewende provided generous feed-in tariffs for wind and solar energy production beginning in the early 2000s and has resulted in lots of renewable power. But those price supports—or “price stabilization,” in Christophers’s lingo—have put German ratepayers and taxpayers on the hook for hundreds of billions of euros in current and future payouts. Even before the Russian invasion of Ukraine, its households and industry were paying the highest electricity prices in Europe—and now, they are paying the highest in the world. At the same time, Germany’s transition to wind and solar only worked because of plentiful backup electricity generated from using cheap Russian gas. Now that the Kremlin’s spigot is shut, Germany is struggling to keep power affordable not only for consumers, but also for manufacturing companies—the backbone of the country’s economy.
Indeed, if one didn’t know better, one could read long passages of The Price Is Wrong as a damning indictment of renewable energy, not just electricity market liberalization. Christophers sidesteps this issue by again deferring to the “powers that be,” who, in his telling, have determined that electricity systems in most places must be not only liberalized but also powered by renewable energy. The result is that while Christophers makes much of the fact that wholesale electricity markets don’t value electricity from wind and solar producers very highly, but he does not follow that fact to its logical conclusion: that no amount of subsidies, price controls, or state ownership can solve the underlying problem of the intermittency of wind and solar power.
Christophers’s fetishization of renewable energy as the only way to solve climate change is, in its own way, every bit as dogmatic as Stern’s fetishization of prices and market failure. One result is that despite so much discussion of the limits of markets and the need for much bigger state involvement, one crucial phrase hardly uttered across almost 400 pages of The Price Is Wrong is “state planning” or its equivalent. If markets and prices are the coin of the neoliberal realm, central planning is its bane; conversely, someone concerned with the failure of markets might look at what planning can do.
Christophers does cite a few examples, such as China’s plans to build massive state-owned renewables installations in the Gobi Desert to help meet fast-growing electricity demand. But he discusses those plans without reference to China’s state-planned electricity system as a whole. Yes, China is pushing wind and solar—but it is also building nuclear plants. With an eye to the long term, China has even designed much of its new fleet of coal-fired power plants so that a new generation of small, modular nuclear reactors, which China is also commercializing, can be installed in those plants in the future to replace their coal-fired boilers.
Arguably the best case for state-led, low-carbon electricity is entirely absent from The Price Is Wrong: France, which resisted the siren call of deregulation in the 1980s and 1990s and instead built a centrally planned, state-owned electricity system powered not by wind and solar, but by nuclear energy. Nuclear, we are constantly reminded, is much more costly to build than wind and solar. But it is clean energy infrastructure that lasts for 60 to 80 years once built. In a state-planned and state-financed electricity system, those costs can be amortized over many decades.
The result is that France has achieved the lowest carbon intensity of any major economy in the world, with electricity prices among the lowest in Europe. It is the sort of thing that, in Christophers’s telling, the neoliberal “powers that be” frown upon. So for a book that offers itself as a corrective, the absence is striking. France offers, without question, the best case for viewing cheap, abundant, low-carbon electricity as a public good, not a market commodity. Yet Christophers has nothing to say about it.
In the end, Christophers is probably right that the electricity market liberalization genie will not be put back into the bottle in many places. Nor is the world likely to give up on wind and solar energy anytime soon. Moreover, there is unlikely to be a one-size-fits-all solution. France’s faith in centralized, technocratic institutions and love of the atom will not easily be transplanted everywhere. Nor will Texas’s freewheeling electricity markets, along with its abundant wind and natural gas resources.
He is also right (even if he never quite gets around to saying it) that liberalizing electricity systems in order to externalize the cost of growing shares of renewable energy is a project that is likely to bring diminishing returns in terms of decarbonization, along with growing costs to both taxpayers and ratepayers. Sooner or later, low-carbon electricity systems will need a lot of something other than wind and solar in order to deeply decarbonize. Right now, the only commercially demonstrated option at scale is nuclear energy, with hydroelectric power also an option in a limited number of places. And competitive markets with increasing shares of intermittent energy sources not only undermine the economics of renewables, but they also make economically efficient operation of conventional nuclear plants, which are predicated on operating virtually all of the time, impossible.
Getting the balance right—between wind, solar, nuclear, and other low-carbon energy sources; between low-carbon and low-cost electricity systems; and between private markets, competition, innovation, and public infrastructure—won’t be easy. But one thing should be clear: If policymakers want low-carbon, reliable electricity systems, they will need to plan for them, and they will need to invest public resources in something other than intermittent renewable energy to get there. Neither getting prices right, as Stern has argued, nor ignoring what they tell us about the value of renewable energy, as Christophers does, is likely to change that.
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