Monday, November 7, 2011

The political economy of renewable energy

In response to my article What’s holding renewables back? fellow blogger Dave Riley posted some interesting discursive comments on FaceBook which I'm reproducing here with his blessing. Please add your own comments below!

In my original article, I wrote "In the competition to displace Old King Coal, gas is the preferred option of capital. Gas is highly profitable because it’s a commodity in its own right."

Dave leads off his discussion by responding to this:
Overseas that commodity reserve doesn't exist to the same degree so extensive investment in  renewable energy has market traction. At least you can sell electricity. But the fact that fuel which is mined is a commodity in the way that wind or sun is not -- changes its nature.I'd suspect that THIS is the main handicap to renewables in Australia.
 To which I responded, "If I understand you right, I think that is what I meant, yes."

Dave continues:
My point is that a commodity is something that is bought and sold. It has value, which represents a quantity of human labor invested in it. There is no human labor invested in 'sunshine' or 'wind'. After all, the air is free. But it has a use value because it can satisfy some human need --ie: breathing, warmth and energy. This is its social use value. 

But it doesn''t have an exchange value because it can not be traded for other commodities. With wind and sunshine supply is relatively limitless. That's the complication. Coal or uranium or gas or oil in contrast have to be mined and processed, as well as transported to a special place where they are turned into harnessed energy.They are after all an increasingly rare resource. 

But with renewables the investment is primarily in the tool -- the harvesting capital as there aint much in the way of congealed ongoing labor to be represented in the final product: energy. Now if the basis of capitalism is the means by which capitalists exploit the labor of others renewable energy presents a market profit making conundrum because aside from covering initial infrastructure costs and maintenance the capacity for ongoing exploitation of labor is rather limited. Aside from harvesting wind or sunshine there's not much value adding aside from the conversion into useable electricity. 

So in a crude but strict sense renewables are a capitalist contradiction because not only do they 'renew' --and even the wear out of the infrastructure is slow -- but they don't lend themselves to ongoing exploitation and market manipulation. No one is going to make a bigger profit on a continental wide basis by grabbing more sunshine and more wind -- or getting the stuff cheaper -- than the next guy. 

Its' a sort of level playing field where the key factor is how efficiently you can harvest the energy NOT how exploitative is your work practices nor how great is the demand or how low/high your price. Thats' an economic culture that is so very UNcapitalist!
 And further:
As a comparable: running the Hepburn Wind Farm co-op isn't based on exploited labor (I guess) nor is the energy that emanates from the solar panels on my house roof. So, to get back to your point, gas may indeed be highly profitable BECAUSE it is indeed a commodity but how is that profitability generated? Who exploits whom? Who rapes Nature? Where's surplus value generated? How? 

The core logic is a pure economic rationale: Capitalism. But with sustainables the equation -- while still operating of course -- is much weaker. So what's holding renewables back? Answer: Capitalism is holding renewables back.
Dave appended a postscript later:

But my point 'may' indeed be very relevant IF true.I've been thinking that the standard history of capitalism that Marxists embrace misses the energy quotient by a mile. [John Bellamy] Foster doesn't actually tackle that full on for instance. There is natural energy and then there is capitalist ENERGY and the real question is how much surplus value is possible by exploiting one or the other.

In his book on Meat (A benign extravagance) Simon Fairlie compares the labour/tool input of cows and horses (esp draught horses) as a means to hoe and harvest on a scale measured by all inputs. The result is that Cuba's turn to to the ox and horse isn't as primitive as it may seem. Significant efficiencies are still in play even outside the carbon accounting. 

If you consider the overall picture things aren't as straightforward as they seem energy wise-- and carbon wise... or even productively. So what I'm thinking is that the shift AWAY from sustainables wasn't so much a question of energy efficiencies (by very shallow accounting vis a vis he raoe [the rape?] of nature) but that capitalism could generate greater levels of exploitation from fossil fuel sources than from the normal shallow impact of renewables. 

Marx touches this on the topic of the 'whatsit' shift ( word escapes me) [metabolic?] but it is much bigger than the poo and recyclables question. The shift AWAY FROM RENEWABLES was also a shift to greater surplus value...(often simplified as profits but not synonymous). 

In continental Europe without major coal and other energy resources the bourgeoisie is forced into renewables but they still yanker for the good oil...That's because I suspect they KNOW that the profitability of renewables is always going to be on downward. 

You can grab a market share and greater profits by dint of technological initiative with your kick arse wind farm etc but the dynamic is that the auto pilot means by which renewables are harvested AND THE LOW LABOR INPUTS make investment in the industry a long term dubious and not preferred. Better/ bigger profits can be had elsewhere ...such as with coal or CSG...or uranium.


  1. As a further addendum, the British historian of the Industrial Revolution,Pat Hudson --
    is very keen to argue that the competitive edge that Britain had in embracing capitalism was determined by easier access to coal than was the case through the rest of Europe.

    The logic, in terms of exploitation makes sense, as the easier access with cheap labour input made coal more competitive to renewables ironically BECAUSE labour could be exploited more..So there was a major shift in sourced energy --a shift that has been going on ever since which has formatted every thing we do.

    Even phosphates and nitrogen inputs for agriculture are a by product of this energy harvesting preference (after WWI --phosphates are a by product of munitions production). So organic was waylaid and all our food and fibre was engineered around the non renewable premiss.

    But what this has created is an interlinked chain of opportunities for surplus value. The dialectic is capitalist thru and thru. That doesn't mean that with either organic or renewables a capitalist economy is excluded (that's almost the Permaculture idyll -- organic= sustainable economies) but that the level of exploitation --thus the surplus value created -- is less.

    So while the renewable vs non renewable divide is about sustainability it is also about a core economic process and
    dynamic. So here in Australia we are almost in sync with early industrialised Britain where our fossil fuel resources sentence our (mature) capitalist economy to not shift to renewables.

    It doesn't make economic the capitalist mind set.

    In part this begins to explain why here and off shore the embrace of renewables as a niche is so darn slow outside of brutal necessity.

    There's not the money to be made. In the light of the possibility that the capitalist rate of profit is declining then a fetish with fossil fuels makes good economic sense as it is a pure exploitation: all you need is miners and bugger the state of Nature.

  2. Perhaps we could look at this in terms of the tendency for the rate of profit to decline. To attempt to explain this (economics isn't my forte!):

    There is a tendency for a greater proportion of investment to go to fixed capital, ie. plant and infrastructure, as compared to wages. Yet capital invested in plant only depreciates; invested in wages it hires employees who utilise the fixed capital to produce new value. So with increased mechanisation, etc, the overall return on capital/rate of profit tends to decrease.

    What better example than renewable energy, where so much of the labour is in manufacturing and installation of the equipment?

    Although we shouldn't underestimate the employment in maintenance and operation, which (for large scale renewables) is usually estimated to be higher than the equivalent in state-of-the-art fossil fuel generators. But it may not make up for lost profits from sale of fuels.

    Extractive industries may have a slightly different dynamic, as the price (not "value" if you care to differentiate) can be quite high due to factors besides production costs, like scarcity. This in Australia is also a highly capitalised sector with high labour productivity, but I imagine the rate of profit declining overall (worldwide) has less impact on the extractive industries' profits and superprofits. Perhaps this also helps to explain Australia's relative prosperity?

    Renewable energy may make reasonable profits for the company that builds or operates it - but it may not help the overall tendency for profit rates to decline.


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