Economic diversity in the energy sector:
Post-capitalism in the here and now?
We are at a crossroads. The tremendous structural changes needed to tackle climate change have presented us with a unique yet clear choice: strengthen the economic and political status quo, or invest in solutions that will not only transform our energy system, but our economic and political systems as well. Nowhere is this choice more evident as it is in the debates around the future of Australia’s energy system.
Rapid developments in renewable energy technology have made the task of transitioning Australia’s energy system away from fossil fuels not only possible, but economically feasible. Yet compared to other OECD countries, Australia has been slow to embrace the transition, which is particularly striking given its vast renewable energy potential.
While Germany produced 36% of its nation’s electricity needs from renewable energy in 20171 and Sweden achieved its 2020 renewable energy goal of 49% back in 2012,2 Australia continues to debate its national renewable energy targets, fuelling ongoing policy uncertainty.
In this challenging and constantly shifting policy environment, three distinct economic models have emerged to transition Australia’s electricity system
to one powered by renewable energy, each posing radically different economic and political possibilities. The first is for privately owned corporations to continue to leverage private investment and public subsidies to fund the switch to renewable energy, effectively strengthening the capitalist status quo.
At the other end of the economic spectrum are a growing number of small-to-medium sized communityowned renewable energy (CORE) projects that exemplify a post-capitalist alternative. The other alternative to capitalist models of production is the publicly-owned model of electricity generation that was responsible for establishing most of the energy infrastructure across the country until privatisation in the 1990s. 3
Each of these models can – and are already – transitioning Australia’s electricity system to one powered by renewable energy. The focus of this article is not the technical aspects of this transition, but the potential of each model to foster more equitable economic systems, drawing on three examples: AGL, Hepburn Wind, and the Queensland Government’s proposed Clean Co.
Capitalism and the Status Quo
Since the 1990s, private companies have generated most of Australia’s electricity. Despite the huge costs involved in transforming the entire energy system, there is significant support among private energy companies for policies designed to accelerate the transition. This interest is not solely motivated by concerns about climate change.
Australia’s current fleet of coal fired electricity plants are ageing, with more than half of Australia’s coal-fired electricity plants having operated for more than 30 years. 4 With the cost of building new renewable energy projects now falling below the cost of building new coal fired plants, 5 the economics are clear.
As the largest owner, generator and developer of renewable energy in Australia, AGL is one of the biggest proponents of investment in clean energy. The company has adopted a goal to retire all of its coal-fired power plants by 2050 and is already taking great strides towards this goal, launching the Powering Australian Renewables Fund (PARF) in 2016 to support the development of over 1 GW of large-scale renewable energy projects.
Senior AGL officials have been transparent about the fact that their motivations do not stem from environmental concerns alone, and that they consider moving investments away from coal and towards renewable energy good business sense.
Sweden achieved its 2020 renewable energy goal of 49% back in 2012, Australia continues to debate its national renewable energy targets.
As AGL’S CEO Andrew Vesey stated recently: "We just don't see new development of coal as economically rational even before factoring in a real carbon cost." 6 During one discussion I attended, a senior manager from AGL took this sentiment one step further, suggesting that as an early investor in the inevitable shift to renewable energy, combined with their existing infrastructure, AGL could be positioned to capture up to 80% of Australia’s electricity market.
AGL’S public commitment to renewable energy is crucial in catalysing the changes needed for a rapidly changing climate. As a large corporation, their ability to leverage vast financial and technological resources could significantly accelerate emissions
With the cost of building new renewable energy projects now falling below the cost of building new coal ﬁ red plants, the economics are clear.
reductions. This is good news for the climate.
From a social, economic and political perspective though, questions need to be asked about the desirability of a private company strengthening their hold over the energy market, particularly when they already control 30-40% of electricity production in some states. 7
The potential expansion of capitalist control during the current period of transition could leave Australia increasingly vulnerable to the kinds of problems that have emerged around the world where neoliberal doctrines have presided relatively unchallenged.
Where fewer and fewer private interests have been allowed to increasingly monopolise essential goods and services (e.g. energy, water, land and even food), issues such as higher costs and less reliable supply to remote, and socio-economically marginalised groups have arisen, accompanied by growing rates of inequality. Some argue that we are already seeing these impacts in Australia given the high prices of electricity and an increasing number of blackouts. 8
Regulations, subsidies and other policy mechanisms already exist to ensure that energy is accessible and affordable to all, so in this sense, private companies in Australia do not operate in a purely capitalist market. Even so, it seems prudent to ask – how effective will these tools continue to be as we
navigate this messy transition, given the ever shrinking reach of government and the increasingly blurred lines between private and public control?
And given the potential of renewable energy technology to decentralise and democratise production and wealth distribution, why would we want to further consolidate the wealth and power of private corporations? What if we could harness the decentralised nature of the technology to foster more post-capitalist models of production, like those exemplified by CommunityOwned Renewable Energy projects?
CORE: A Post-capitalist Alternative
At the other end of the economic spectrum, Community-owned Renewable Energy (CORE) projects represent a post-capitalist alternative. CORE refers to “projects where a community group initiates, develops, operates and benefits from a renewable energy resource or energy efficiency initiative. Community groups are formed based on a common interest or geographical region such as a town or suburb.” 9
There are currently more than 90 small-to-medium sized CORE projects around Australia, 10 with the Hepburn Wind Farm one of the most well known examples. Hepburn Wind was established as a locally-owned cooperative with over 2,000 member-investors.
The first community-owned renewable wind farm in Australia, the primary motivation for the project was a frustration with government for not doing enough to combat climate change and a desire to take action to reduce emissions in a meaningful way.
Initial investment was generated through a mix of sources: cooperative members contributed $9.8 million, with state government grants and a loan from the Bendigo Bank contributing an additional $4.8 million. 11 From this initial investment, the cooperative built two turbines that generate a total of 4.1MW capacity, equivalent to the electricity needs of around 2300 Victorian homes. 12
With most of the cooperative members local to the area, Hepburn Wind is designed to encourage widespread community ownership and engagement and to ensure that the project generates economic benefits for the region as a whole. It does this by returning profits to members as dividends, but also by generating local employment opportunities and investing in local projects through a community fund. The cooperative has also invested significant resources into developing local capacity, leadership and decision making processes, in line with their goal to improve democratic participation. 13
CORE projects like Hepburn Wind
There are currently more than 90 small-tomedium sized CORE projects around Australia.
can effectively produce electricity in affordable and reliable ways, but they produce it in ways that redistribute wealth and power. 14 In this way, they exemplify a post-capitalist alternative that conceptualises energy not as a commodity to be traded, but as a fundamental right or essential service.
By offering a different economic and governance model, CORE asks who should be making fundamental decisions about this essential service and how profits should be used – to maximise the wealth of private (often foreign) shareholders, or channelled to support local communities to achieve self-sufficiency and economic sovereignty?
They exemplify a postcapitalist alternative that conceptualises energy not as a commodity to be traded, but as a fundamental right.
There are limitations to this model, in that it places significant demands on the local community and users in terms of resources, time, leadership, skills and community goodwill to develop and maintain the system. Not all communities have access to the required resources and it raises
an interesting ethical question as to whether communities should have to take on the responsibility for such an important service, or whether this should instead fall fully under the purview of government.
Public Control: The LEAN Alternative
A second alternative to a capitalist model of electricity production is public ownership through governmentowned corporations. Publicly owned electricity companies are the second largest electricity generators in Australia, and the main producers in the states of Queensland and Tasmania.
While public companies now operate in ways that seem almost identical to private corporations, some advocates for renewable energy have been calling for an expansion of public control over electricity generation in the belief that government-owned entities would be able to ensure a smoother transition through direct control. One such advocate is the Labor Environment Action Network (LEAN) – a crossfactional branch of the Labor Party.
In the lead up to the 2017 Queensland State Election, LEAN campaigned for the establishment of a new state-owned company that would build 1 GW of large-scale renewable energy infrastructure by 2025 to:
…ensure the management of the energy industry delivers the supply of energy in the public interest, and to maximise the benefits of public ownership, driven by the goal of providing affordable, reliable electricity to Queenslanders while reducing pollution. 15
Public resources are currently spent on subsidising the private sector when that money could be invested directly to produce revenues for the state.
In contrast to the way private corporations conceptualise electricity as a commodity, LEAN considers energy a public good or essential service, and sees government ownership as in the public interest, stating: “The market does not best serve the public interests when it comes to things we all need. Profit should not be the only driver in the delivery of key services.”
In this way, LEAN directly challenges the dominance of capitalism and the idea that the role of government should be limited to that of regulator, asking why public resources are currently spent on subsidising the private sector when that money could be invested directly to produce revenues for the state.
They instead propose that statecontrolled energy production is the most direct way to ensure that the benefits of the current transition reach everyone, by using profits to provide more affordable energy; ensure access to low-income households and rural and remote communities; cross-subsidise other public goods and services; and deliver local, long-term job creation and training opportunities.
While LEAN has been successful in
their campaign to win a commitment from the Queensland Labor Government to create a ‘Clean Co’, 17 time will tell whether it can disrupt the status quo and move past the politics that have plagued reform in the energy sector so far.
Queensland already has two government-owned generators, but ongoing ties to coal and gas extraction – whether through State revenues or electricity generation – will probably mean that action to catalyse large-scale shifts to renewable energy will continue to depend on which way the political winds blow.
Implications for a Post-capitalist Future
These three case studies not only represent different ways to generate and distribute electricity, but three contrasting economic models that engender distinct economic and political possibilities.
The privatised model represented by AGL points to a strengthening of the capitalist status quo in that, as a corporate entity, it is designed to trade a commodity competitively to maximise profits, expand its market share and minimise the impacts of regulation.
In contrast, CORE exemplifies a post-capitalist model of production, holding the potential to democratise the electricity system by decentralising ownership, redistributing profits and ensuring financial and other benefits flow to the local community. In this way, CORE challenges the capitalist status quo and holds the potential to undermine the ability of large private or public corporations to monopolise access to an essential service.
The LEAN model differs again, in that it advocates that control rest with the State, which captures and reinvests profits into services for the public good, relying on the ballot box as a means for ensuring energy democracy.
All three examples can transition Australia to 100% renewable energy production. All three share financial and other benefits with the broader community. But as we navigate this time of transition, there are still many questions yet to explore: What do these different systems mean for how power and wealth are concentrated or distributed? Who do we want controlling a resource on which individual wellbeing depends, as well as society’s ability to function? And is access to electricity a human right, a public good or a commodity to be traded?
These are big questions that not only hold serious ramifications for our ability to mitigate the impacts of climate change, but for democracy itself. Underpinning them is the fundamental issue of whether we want to further consolidate the very same capitalist relations of production that have driven climate change and that continue to exacerbate growing levels of socioeconomic inequality.
Post-capitalist alternatives that redistribute wealth and power already exist. But not all alternatives are equal. Whether or not they will deliver on their potential to challenge the capitalist status quo to create a more equitable and resilient future is not a question of technology, but of politics.
Where do we go from here? Well, that’s up to us.
Is access to electricity a human right, a public good or a commodity to be traded?
IMAGE: © Blackrocksolar-flickr