Mastodawn

#books #EnergyTransition #ClimateChange #Economics #Housing

Just started reading #ThePriceIsWrong and it strikes me that the core argument that the desire for renewable energy to be cheap through competition is fundamentally in tension with the need to attract investment by offering a profit margin rhymes with this classic post by @danielkayhertz on why housing can't be both affordable and a good investment.

Also, is it reasonable to try and scale one industry through policies that encourage or even enhance competitive pressures, driving prices down, while allowing monopolies to consolidate and extract rents in other industries? Seems like smart money would make have an obvious choice.

https://www.woodmac.com/podcasts/the-energy-gang/can-capitalism-save-the-planet/

The Energy Gang also reviewed The Price Is Wrong, alongside @akshatrathi's Climate Capitalism a while back (though Climate Capitalism didn't get much airtime unfortunately!)

Can capitalism save the planet? | Wood Mackenzie

Can capitalism save the planet? Join Ed Crooks, Melissa Lott and Joseph Majkut as they debate the role of private investment in tackling climate change. Discover contrasting perspectives in

https://www.woodmac.com/podcasts/the-energy-gang/are-low-profits-to-blame-for-energy-transition-lagging/

And they just had Christophers on this week to talk about the book. It seems to be somewhat disconcerting to the capitalists, in a way that makes them unwilling to just dismiss it out of hand, which is great.

Are low profits to blame for the energy transition lagging? | Wood Mackenzie

Author Brett Christophers joins host Ed Crooks and guests Melissa Lott and Joseph Majkut for a deep dive into the theories presented in 'The Price Is Wrong'. Is low profitability hindering the energy transition?

Zane Selvans Jul 28, 2024

About a third of the way through the book, another (for now latent?) argument seems to be that fossil fuels are both artificially cheap and artificially profitable, because we don't price GHG emissions, and we allow many producers to capture huge land rents -- they're simply liquidating natural capital.

Zane Selvans Jul 28, 2024

So if we want renewables to be able to compete we can either remove these subsides for fossil fuels by capturing the land value through high severance taxes, and pricing the emissions, or we can provide even more substantial subsidies to renewables to make them competitive in terms of both price and profit margin.

Zane Selvans Jul 28, 2024

Or alternatively, we can raise a pool of patient (public) capital that's happy to take the 5-8% return from renewable energy development because it values the positive externalities.

#Electricity #Markets #Economics #EnergyTransition

In markets where zero marginal cost resources like solar sometimes satisfy all demand and they have merit-order dispatch, why don't they try to restrict output so that just a *little* bit of gas comes online, and all the solar generators make a bunch of money? Especially if they also have storage and can still sell the excess generation later.

Jenny Chase

@ZaneSelvans because that's cartel behaviour. It works for fossil fuels because there are few enough suppliers to make an effective cartel (eg OPEC).

However, there are many more renewables suppliers, and if existing solar plants did this, more would be built that didn't participate in the cartel behaviour. Because there are few barriers to entry in renewables. This is both a beauty and a thing that makes it hard to make money about them.

@solar_chase It seems like this tension shows up in other places too. Like whenever we want something to be affordable, but we also want it to be a good investment. Right now I'm thinking of housing in the US.

Jenny Chase Aug 4, 2024

@ZaneSelvans yeah, the big difference seems to be that renewables are still being built.

For my money a lot of the tension in government policymaking goes away if you just say "from a system perspective, it makes sense to offer certain renewables long term power contracts, eg CfDs, at low prices. This is a hedge for the power buyer against future high gas prices, and allows renewables to attract risk-averse investors with low cost of capital."

@solar_chase Listening to Dave Roberts' podcast, it seems like there are a lot of decarbonization businesses starting to be built around the idea of episodically available cheap-or-free renewable electricity and I've wondered how many of them can actually get built out, before that electricity isn't "free" anymore. I wonder if they could form an effective demand management cartel, to carefully avoid gas turning on and spiking costs.