Selling renewable energy: A review of three new publications

Anton Eberhard and Wikus Kruger (Eds.), Renewable Energy Auctions: Lessons from the Global South. Oxford University Press. 2023. 512 pp. £100.00 (hbk). ISBN: 978-0192871701. £66.66 (ebk). ISBN: 978-0191967931. Pablo Del Río and Mario Ragwitz (Eds.), Handbook on the Economics of Renewable Energy. Edward Elgar. 2023. 496 pp. £215.00 (hbk). ISBN: 978-1800379015. From £48.00 (ebk). ISBN: 978-1800379022. Georges Hathry, Renewable Energies: The Stakes for Your Company. What does Your Company Gain from Using Renewable Energy? Our Knowledge Publishing. 2023. 76 pp. $48.00 (pbk). ISBN: 978-6206326922. In the latest COP 28 UN Climate Change Conference held in December 2023 in United Arab Emirates, signatory countries promised a transition from carbon energy sources “in a just, orderly and equitable manner” (UNFCC, 2023) to mitigate, accordingly, the worst effects of climate change, and reach net zero carbon emissions by 2050. In the history of COP summits, though vague with respect to how and when the transition will happen, the latest UN conference set a precedent in affirming the necessity of reducing the use of fossil fuels. (Though, notably, China and India, representing more than one-third of the world's population, did not sign the pledge to triple their output of renewable energy and committed to coal power instead.) Researchers from policy institutes, leading academic institutions and elsewhere have devoted significant effort to explaining the economic benefits transitioning to ‘renewable’ energy and pursuing the commitments made under the auspices of the UN climate change agreements. Monographs and compendiums as well offer advice on how to navigate and benefit from the transition. Some works address legal and regulatory issues such as Promoting Renewable Energy: The Mutual Supportiveness of Climate and Trade Law (Monti, 2023) or focus upon technical and engineering matters as in Fundamentals and Applications of Renewable Energy (Kanoglu et al., 2023). Looking at each of these themes in turn, we begin with the popular concept of energy security. Energy security is a recurring theme in the design of energy policy even though there is no consensus on how it should be measured or achieved, or on the relevant time frame over which it should be assessed. Ever since petroleum became critical to modern economic life, people have been concerned about whether its supply was ‘secure’ and would be fairly priced. Of late, such perennial concerns have been used to support renewable energy, but what ‘security’ precisely involves is uncertain. There are many interesting metrics and indices purporting to measure energy security. It may involve the ratio of domestic supply to domestic consumption, looking at resource estimates or metrics related to economic structure such as producer concentration, energy intensiveness and market conditions. Distinct disciplines, as well, use different metrics. We have the accessibility perspective originating in political science; the availability perspective using geologic and scientific insights; and the affordability perspective with its roots in financial economics (Cherp & Jewell, 2011). According to the International Energy Agency (IEA), energy security signifies “the uninterrupted availability of energy sources at an affordable price”.1 Questioning the validity of energy market insecurity, using historical data and the statistical insights of financial option theory, some authors have argued that petroleum markets are remarkably robust and flexible, and perform well even during ‘crises’ (Haar & Haar, 2019). Concerns over security are unwarranted and reliance upon imports is not problematic (Robinson, 2007). As we saw recently when Russia invaded Ukraine, prices did not exceed previous highs, markets cleared without excess demand and supply. Though there many perspectives on the concept of energy security, and concerns over it may be arguably unjustified, a common theme running through the renewable energy research and advocacy found in the publications under review is that energy markets are inherently insecure, but renewable energy will address this problem.2 George Hathry opens his work by claiming that both companies and countries will enhance energy security through renewable energy. This claim is also made in the collection edited by Pablo Del Río and Mario Ragwitz (p. 3.) Similarly, in the work edited and authored by Anton Eberhard and Wikus Kruger various authors claim that only through private investment in renewable energy can the energy insecurity of the nations of the Global South be addressed (p. 2.). Further, it is argued that Brazil can address insecurity in electricity supply through renewable energy (p. 290), even though it has 16,172,000 million cubic feet (mmcf) of gas reserves and produces 3.3 million barrels per day (mmbd) of oil; or that Namibia can address its insecurity of electricity supply through displacing imported electricity from South Africa or imported petroleum or natural gas with renewable energy (p. 405) even though Angola, its northern neighbour has 9,711,000 mmcf of gas reserves and produces 1.4 mmbd of oil. Further, in 2021 the Canadian firm Reconnaissance Africa discovered in Namibia 120 billion barrels of oil in the Kango basin. Argentina has 11,142,000 mmcf of natural gas and produces over half a million barrels of oil per day (mmbd) while Brazil has 16,172,000 mmcf of gas reserves and produces 3.3 mmbd of oil. The premise of the proposition that renewable energy is a means of addressing supply insecurity is dubious: most countries are net importers of petroleum, as it is critical to energy and the petrochemical sectors of modern economies, and the global 100 mmbd market is remarkably flexible. Though the purpose of sanctions against Russia was to reduce its revenues from petroleum, with the unintended consequences that its discounted Urals crude went east while Europe found new sources, the events attest to the depth and liquidity of the market. The countries of the Global South that Eberhard and Kruger focus on have bountiful access and supplies of hydrocarbons. International energy markets are not ‘insecure’ as renewable energy advocates claim; and replacing low-cost imported energy or domestically produced hydrocarbons with expensive renewable energy, as explained below, conflicts with the received economic theory of trade. That energy may be imported does not make it ‘insecure’, and replacing it through renewable energy may not be economic.3 Although a scenario in which China stops exporting solar PV panels appears remote, we should remember that generating electricity in this manner, like relying upon wind turbines, involves international trade in energy intensive, globally sourced materials.4 Not surprisingly, in all three works we find the theme that transitioning to renewable energy will help the environment by reducing GHG. Georges Hathry begins with this message, as do Pablo Del Río and Mario Ragwitz, whose introductory chapter tells us that satisfying the Paris Agreement of 2015 and achieving sustainable development goals requires transformation of our global energy production and consumption system. In Eberhard and Kruger's collection, the role of the Global South in reducing GHG is a recurring theme. In the eight countries examined – Brazil, Chile, Argentina, Mexico, India, South Africa, Zambia, and Namibia – the respective authors, as area experts, explain how private investment and market mechanisms may be used to reduce CO2 emissions, demonstrating commitment to the various COP objectives. Excluding India from the examined countries in the Eberhard and Kruger collection, the CO2 emissions of the other seven countries sum to less than 4.5 per cent of global CO2.5 Even the United Kingdom, with the sixth-largest GDP, contributes only 1 per cent to global CO2. Though it may appear meritorious to act locally while imagining a global impact, the facts are not supportive. Arguably, the alternative to ‘free riding’ should be global cooperation. For countries of the Global South covered in Eberhard and Kruger's work, investing in renewable energy will have no measurable impact upon atmospheric CO2 or prevent climate change. If the incentives and subsidies being offered to developing countries to adopt renewable technologies in general were instead directed to the world's most-emitting sectors, there would be greater CO2 reduction at a lower cost. A global agreement on the taxation of CO2 might be one approach (Shackleton, 2020), and, in contrast to technology-specific incentives, taxing carbon ensures that firms and sectors with the lowest costs of abatement act first. In contrast, offering incentives for renewable energy, grid-level battery storage or carbon sequestration involves governments picking winners – Hayek's ‘pretence of knowledge’. Moreover, disaggregating the effects of policies from general economic trends is challenging and assumption-intensive (Moutinho et al., 2015). Perhaps these authors should recall the observation of the late Professor Milton Friedman: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”6 Apart from achieving COP objectives, the economic case for investing in renewable energy in the Global South remains questionable especially given its minuscule contribution to global CO2. Even in Europe, independently pursuing COP objectives may appear environmentally virtuous, but is devoid of economic common sense. Altogether, it echoes Marx's mantra: ‘From each according to his ability, to each according to his needs.’ From pre-industrial times to the 1950s, global levels of atmospheric CO2 hovered around 300 parts per million or 0.03 per cent of the atmosphere. It has now grown to around 400 parts per million or 0.04 per cent of the atmosphere. Though CO2, as a by-product of the chemical reaction known as combustion, was never a concern until it was associated with climate change, the replacement of technologies using fossil fuels with renewable energy technologies is commonly portrayed as a ‘win-win’, that is, the costs of climate change are averted, and it is better and cheaper than fossil fuels. In all three works, in both presumptions and overt claims, it is argued that the cost of energy will be reduced through reliance upon solar PV and wind-turbine generated electricity. Hathry makes this claim in his chapter 3. Eberhard and Kruger's collection tells us that the reliance upon market mechanisms has facilitated investment and provided cost-efficient electricity tariffs for the provision of clean, renewably generated electricity. According to the authors in the Eberhard and Kruger collection, the criterion for successful implementation of renewable energy is that an independent power project is built and achieves ‘commercial’ operation in a timely manner and offers a low, competitive price of electricity, critically defined using the metric of the IEA and the International Renewable Energy Agency (IRENA). The indirect ‘ancillary’ costs of providing system balancing and backup as well as network costs are mentioned along with their inevitable ‘socialisation’, that is, the impact upon consumers, but not considered in depth. According to the various contributors, renewable energy is successful if the agreed tariff price is similar to or slightly below the Levelized Cost of Energy (LCOE) of the relevant technology, that is, wind turbines or solar.7 But does this criterion measure ensure economic merit? Properly, the use of this criterion ensures only that the prices received by investors–developers of renewable energy reflect their respective costs including an adequate return to capital; it does not imply that such a price will be cheaper, the same as, or more expensive than other forms of electricity generation, like dispatchable fossil-fuel plants or nuclear (US EIA, 2022). To elaborate, while renewable energy is often presented as competitive with fossil-fuel-fired electricity generation, this assertion confuses price per installed megawatt with price per megawatt hour, as determined through the aforementioned LCOE calculation. though its is the significant are Moreover, even in Africa or Brazil, solar PV does not work at In most parts of the wind of the time and wind about a of the For if we a of per we might that times would the same output of one at a of per The zero the are not instead that one might a investment in wind or solar renewable to as electricity as a gas of the same while the price of installed has for renewable technology, an of the cost of by the of to reach an that renewable energy is not Even with taxation of CO2 and other if it were to dispatchable like gas turbines and how it should be would be a LCOE of various forms of generation, does not the of their respective Though the authors of the Eberhard and Kruger collection the indirect costs of renewable energy investment and that such costs may be is, for by the is given It be In the Del Río and Ragwitz collection, such are in depth. In chapter and of the Energy by and we have a and of renewable energy has indirect Further, in chapter of Renewable Energy by and we find a and of the to make renewable energy We as a of electricity generation, it requires investment in to cost for per Further, it requires fossil-fuel plants at to be dispatchable when the output and the does not In the according to the energy the cost of energy prices now per The costs of associated with renewable technologies be Argentina has per of per cent of the time it is or under India has per cent of the time it is or under Even in Zambia, per cent of the time and may solar PV Though it may be that in parts of Africa and India renewable energy will be a of electricity without grid-level it cheaper, it is to being with an and supply. in Argentina, South Africa and Brazil in renewable energy will fossil-fuel backup or investment in grid-level both of which to Europe, it has been that providing dispatchable backup to renewable energy is of of per (Haar & Haar, According to recently data by the IEA at the University of a billion in its support for renewable energy and will to about billion of that on new and backup plants when wind or and solar panels from to the Further, for the costs of net zero by are to reach or billion per To only one of the three publications insights what transitioning to renewable of electricity will cost. of indirect costs may but when one the facts the case for using to electricity is especially in the and countries of the Global South. From a one how of the Global South would if were on the in transitioning to renewable energy. As we have in the world's most economies, since the economic has been through fossil fuels. the cost of energy will not be reduced through reliance upon solar PV and electricity, and reliance upon it in developing countries will not make If it were economic to electricity using renewable rather than natural petroleum or it would not policy do not incentives to the transition to the of electricity from and the use of market to and affordable electricity, in all three works a role is to private and in achieving the transition to wind and solar Hathry private and how renewable energy may be at firm how to measure energy consumption and the from renewable energy. the benefits of using and generating renewable energy are also A case in work of the the the benefits in this in work are the as well as It may to for a firm to its of being but how energy prices be for if it The impact consumers, and Further, we have the of the indirect costs of renewably generated electricity, as In most firms are and other to use or adopt renewable energy. incentives have a a for one means for incentives may have in a upon the the and of a petrochemical “the of energy is leading to the of The that the in CO2 output is to Promoting might but the costs to economic have concerns that the will be the of the domestic In perspective the impact upon prices for domestic energy and reduce the power of consumers, which be for such as have been by energy In the of have their the cost of a general from the of renewable energy such as through prices from their natural cost and to it would not without incentives, the of renewable energy have a net impact to a Even with respect to through renewable energy et al., 2022). in the Del Río and Ragwitz collection in the Renewable Energy by and the of the impact of renewable energy claiming that renewable energy will are not many the of is than the impact upon and such benefits are while the like and are to measure and the Though are of a general the focus of the many authors in the Eberhard and Kruger collection is on how the use of energy may private in renewable energy, in the nations of the Global South. Brazil, Chile, Argentina, Mexico, India, South Africa, and the respective authors, as area experts, and on the and of renewable energy in each of these chapter a of and on the structure and of the power The is by and other the insights how each of these countries to address electricity supply through reliance upon market mechanisms and private The and made do not the economic of these investment From this work, we that renewable energy have the approach to renewable energy The history of markets in Africa, and India are and with the of how are and In each the focus is on policy including how the was what institutions were and how the was of reliance upon or for all these countries to the private to supply electricity and relying upon a market to set the price was a As a natural for or private there was a history of to using the private to supply electricity and a market to set As we from Eberhard and Kruger's collection, in some countries private investment upon renewable energy was to address and of the In India, we that the was by the of but the to reduce the cost of renewable energy, to and have in a timely manner were was the of and indirect system support rather than such costs upon a option for provided and In some were to using private and to renewable energy in other new and were In Chile, we that the of a and a regulatory system to to markets and economic successful of the to and renewable electricity in South Africa should have been but private investment Though South Africa been the in renewable energy the in late to address power as well as demonstrating commitment to UN Climate Change Conference its was and for Further, its was while and was from In countries such as Brazil and Mexico, of the electricity including of supply from and were to and for private In Mexico, an energy was along with a market and the was independent various parts of the In Argentina, the history of economic and presented the of by the to financial to It was successful in until the of it was to from In from a of private in electricity supply as of was made using financial by the to in the from In Zambia, an approach to design was used to and In from the collection we that renewable energy have the for renewable energy in to the tariffs through this upon private and market in renewable energy by the countries of the Global South has been but does this the these countries have used a market to renewable energy investment and upon the private to renewable generation, often using the LCOE for as a for prices of this does not The authors in the Eberhard and Kruger collection the of whether renewable energy, even using market and In from this should reflect Though investment in renewable energy through achieving COP objectives, the authors in the Eberhard and Kruger collection the of whether it economic and development in their respective it or In to being cheaper when considered the and of these countries makes one should renewable energy, if not for achieving UN sustainable development goals or with Argentina, as has natural gas and oil does produces over mmbd of oil and of Brazil in mmcf of gas Angola, the northern neighbour of has 9,711,000 mmcf of gas reserves and produces 1.4 mmbd of oil. Though has a oil and gas its neighbour is to have 100 million mmcf of gas in the Altogether, the supply of hydrocarbons for electricity generation, or from the of whether of electricity makes sense. The LCOE may be but it requires investment in and as well as dispatchable For economic would renewable energy in the countries of the Global or for that make if we were not concerned with the impact of using fossil fuels to all the authors in Eberhard and Kruger's collection that renewable energy has and network all about the according to in a of on the impact of renewable energy, found that reliance upon renewable energy would electricity prices per cent and per according to replacing fossil fuels with renewable energy will of the developing to Apart from achieving COP objectives, the economic case for pursuing renewable energy in the Global South remains questionable especially given its minuscule contribution to global CO2. Perhaps the of and the various governments covered by Eberhard and Kruger appear committed to renewable energy output without for the costs on of electricity and the for economic This also the of how well the of Europe and the impact of fossil fuels from electricity the commitments to the energy from policy institutes, leading academic institutions and elsewhere have devoted great effort to explaining the economic benefits of transitioning to ‘renewable’ energy and pursuing the commitments made under the auspices of the UN climate change agreements. The three works offer insights and advice on how the transition may be for and the edited are by the most with the one edited by Pablo Del Río and Mario Ragwitz the most offering insights the costs of how we electricity as well as such as The collection edited by the University of Anton Eberhard and Wikus Kruger insights how various countries of the Global South have used market mechanisms and private to renewable the use of market whether such policies and are offering is given The work of Georges Hathry has a different the to more about renewable energy and his or firm should It is and in its but the case are providing on how and one should In of a like sustainable energy, these works that the to renewable energy may more than Perhaps we should recall the of the which does not is

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