The Price is Wrong: Why Capitalism Won't Save the Planet

by Brett Christophers

First, we know that what ultimately determines whether solar and wind farms get built or not is not price – relative to that of other technologies of electricity generation – but profit, and, more particularly, expected profit. Is the investment expected to yield an economic return that the developer deems acceptable? That is what matters. Second, we know that the relationship between price (of electricity generation) and profit is anything but straightforward. It would be easy to imagine that the cheaper it becomes to generate electricity, the more profit the generator will earn. But it would also be wrong. This was the lesson of Chapter 5: there is no straightforward such relationship, and thus even if solar and wind power are now ‘cheap’ it does not mean that profit-maximizing actors in the field of power generation will necessarily privilege them. Third, from Chapter 6, we know that in the type of electricity sector that dominates the Global North, and towards which the rest of the world is indubitably shifting – which is to say, a sector in which electricity is predominantly traded in spot markets using merit order dispatch – renewable generators’ expected profit is highly uncertain and unpredictable because wholesale prices are highly volatile. This, as we saw, represents a significant challenge to the bankability of proposed new capacity investments, at least in the absence of explicit mechanisms of price stabilization, of which government support schemes historical...