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The Politics of Renewable Energy

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Rakesh  Sharma's picture
Journalist Freelance Journalist

I am a New York-based freelance journalist interested in energy markets. I write about energy policy, trading markets, and energy management topics. You can see more of my writing...

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  • Aug 19, 2021
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The ascent of renewable energy is one of the biggest stories of our time. From being an outlier less than fifty years ago, renewable energy systems have become an integral part of the electric grid across the globe. Thanks to aggresive decarbonization goals, they are now set to become its future. 

Renewable energy owes its success as much to rapid advances in technology as to the politics of energy systems. While the former advanced its use, the latter helped inform and craft public opinion about renewable energy systems.   

Renewables – The Politics of a Global Energy Transition by Michael Aklin and Johannes Urpalein attempts to chart the circumstances and history of the politics surrounding renewable energy during this transition. Aklin and Urpalein are professors of political science and energy systems at the University of Pittsburgh and John Hopkins University respectively. The book is a “comprehensive political analysis” of renewable energy’s growth. While it does an excellent job of documenting the energy transition, it fails to provide an overarching analytical context within which to frame this transition.

The Politics of External Shocks

The author’s main thesis is similar to the Austrian economist Joseph Schumpeter’s “creative destruction” concept. It goes as follows: an external shock creates the conditions necessary for introduction of a new idea or radical change in the existing energy system. Opponents and proponents of the change are mobilized. Further progress of the change depends on the outcome of initial skirmishes between these two groups. If proponents of the change are successful, then it proceeds unimpeded into a country’s energy systems. Else, it moves forward in fits and starts, dependent on political patronage and advocacy. Once renewable energy has cornered enough market share, a lock-in effect occurs, and it becomes an indispensable part of the grid.

Of course, this is the idea in broad strokes. There are differences in its implementation because each country has different priorities and energy systems. Developed economies consist of multiple sectors and industries with variable needs that are serviced by a disparate array of energy sources. External shocks are opportunities for such economies to reconsider the diversity of their energy sources.

Countries dependent on revenue from fossil fuels do not have this choice. Unshackling their energy systems away from the prime driver of their economies is a steepening and fraught curve and comes at great cost. Venezuela and Saudi Arabia are examples of the latter while most developed nations, like the United States and Germany, fall within the former category. Aklin and Urpalein are mainly concerned with the response of developed countries to energy crises.

The United States: A Leader to a Laggard and Back Again

The oil shocks of the 1970s were the main trigger for development of renewable energy in the United States. The 1973 oil embargo imposed by Organization of Petroleum Exporting Countries (OPEC) against Western supporters of Israel during the Yom Kippur war proved to be the most potent of such shocks. Prices for the fuel soared and America, which had been the world’s biggest oil producer up until the Second World War, seriously began considering and funding alternate sources of energy.

Much of the foundation for the current renewable energy boom was laid in the 1970s. 

The Department of Energy was established. PURPA was passed. California started on the road to integrate renewable energy into its grid. Subsidies for ethanol were put in place. These changes were considered radical back then. But opposition to them was minimal as the renewable energy industry was still nascent and was not considered a major threat.

The politicization of renewable energy in the United States began with the Reagan administration in 1980.

During a television debate with President Carter, candidate Reagan dismissed his energy policy: “The Department of Energy has a multibillion dollar budget, in excess of $10 billion, but it hasn’t produced a quart of oil or a lump of coal or anything else in the line of energy,” he said.

As President, Reagan followed up his words with action by slashing funding for the agency and renewable energy’s fortunes began a decades-long decline through successive Republican administrations. Oil, whose price dipped to historic lows, became resurgent. Solar and wind tax credits were left to expire in some instances. Installation of wind farms plummeted to just 19 MW by 1992.

The United States had been a leader in the development of renewable energy during the Carter administration. Now it became a laggard.

President Bill Clinton’s administration signaled a change in energy priorities. Renewable energy, which had been on the back burner for Republican administrations, once again rose to prominence. Funding for the Department of Energy increased and ARPA-E was established for further research. Subsidies and tax credits for renewable energies received a major boost. States became aggressive with their Renewable Portfolio Standards (RPS). All of this brought a steady flow of money towards renewable energy companies and helped them mount a successful opposition to giants from the fossil fuel industry.

Successive administrations, whether Republican and Democratic, have carried the work forward, albeit with hiccups. The current administration’s assortment of energy-related measures – the $1 trillion infrastructure bill or the Green New Deal – can be said to represent a tipping point for renewable energy in the country.    

The Cases of Germany and Denmark

Even as renewable energy languished due to domestic politics in the United States, other countries around the world were racing ahead. Germany and Denmark were notable cases. Both had suffered from equally hemorrhaging impacts to their economy due to the 1970s oil shocks. Renewable energy offered an alternative, away from oil dependence. Its progress through their energy systems was relatively smooth and was not politicized to the extent that it was in the United States.

According to the authors, the absence of a big oil company, like Exxon or Chevron, that could generate opposition to renewable energy and a combination of urgent events – unification and nuclear disasters – swayed public opinion in favor of renewable energy in Germany. The emergence of the Green Party became a major force in the country’s politics and offered a valuable counter to conservative movements which emphasized fossil fuels and nuclear as the way forward.  

In Denmark, renewable energy was propelled forward thanks to a grassroots movement. Local ownership of windmills was offered to agricultural cooperatives. The cooperatives, thus, became recipients of subsidies offered by the government and the benefits of renewable energy were distributed across a wide group of people. Denmark is also the world’s biggest producer of wind turbines. Development of the industry strengthened the clean technology lobby so much so that the Confederation of Danish Industry opposed a Feed in Tariff (FiT), when it was suggested. Many early Danish policies, such as QC requirements for windmills and custom duties, were designed to encourage and protect the industry.     

China and India: Emerging Economies

China and India are among the world’s biggest consumers of fossil fuels. Like Germany and Denmark, political opposition to renewables is either absent or muted within their economies. That is a function of their political dynamics and economic imperatives. The relatively closed nature of China’s political systems and its top-down approach means that opposition to government policies are not appreciated or encouraged.

 

India represents both a problem and an opportunity. According to a 2012 estimate by the Government of India, about 400 million people in the country do not have access to electricity. The country suffers from last mile connectivity problems, especially in its villages. Renewable energy can be connected to the grid and also used as an off-grid electricity generator to solve the last-mile connectivity problem. The benefits of renewable energy, coupled with the fact that the country’s coal industry is corrupt, has coalesced political consensus around it.

A History, Not an Analysis

While the book offers a comprehensive history of the politicization of renewable energy across many geographies, it fails in the analysis department. Government policies that moved renewable energy forward are named and documented but they are not discussed.

 

What was the reasoning behind policy-making related to renewable energy and what were some counter-arguments to such policies? The authors do not provide much detail. They also do not discuss the intersection between finance and renewable energy. The politicization of renewable energy in the United States is a function of money. Only after they had substantial bank reserves were companies and advocacy organizations able to influence legislation relating to the industry.

There’s also the fact that the economics of renewable energy influences its political trajectory. The Levelized Cost of Energy (LCOE) for most forms of energy depends on subsidies doled out by the government. How did the approval and removal of subsidies and tax credits affect the politicization of renewable energy? How does the infusion of private capital into the energy industry affect its politicization?

The first round of investments into renewable energy startups in Silicon Valley resulted in several duds. Even the Obama administration burned its hands with Solyndra. Only the invention of SPACs, a financial engineering maneuver, has helped them re-emerge during the pandemic. The new crop of startups are flush with funds from public investors. Will they be able to influence favorable legislation earlier in the process (as compared to most Silicon Valley startups) or will incumbents continue to dominate policy-making? 

The prescriptions offered by the authors to grow renewable energy are also predictable. Here’s an example: a global policy coordination is required to ensure growth of renewable energy. But the authors do not elaborate on the contours that a global policy coordination might take in a connected and unequal world.

In sum, the book is an interesting and informative read about the politics of renewable energy. But it does not provide much context about the development of a political approach to renewable energy or what shape this approach might take in the future. 

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Matt Chester's picture
Matt Chester on Aug 19, 2021

The Levelized Cost of Energy (LCOE) for most forms of energy depends on subsidies doled out by the government. How did the approval and removal of subsidies and tax credits affect the politicization of renewable energy?

An important point-- the support (explicit and implicit) of various energy sources is ever-present. With huge lobbying machines behind each energy source, making changes to the status quo is a heavy lift, but the impact on day-to-day energy-related markets is immense

Michael Keller's picture
Michael Keller on Aug 23, 2021

Wind and solar require government subsidies, mandates and carbon taxes to succeed in the marketplace. Absent such help, investment evaporates, as we have historically seen on multiple occasions. Gas turbine power plants readily compete with little, if any, subsidies. 

The never-ending subsidy/mandate playing field lopsidedly favors renewable energy, to the detriment of consumers and businesses as well as other types of generation. As with most government subsidy programs, stopping the support is politically difficult, as the political class use the programs to buy votes. Ideally, all resources should be treated evenhandedly, but lining the pockets of the undeserving but powerful oftentimes overrides fairness.

Forecasts of mass deployment of green energy suffer from a myopic vision of the distant future common in the euphoria of the beginnings of new technologies. Straight line projections into the distant future invariably run into reality, as unexpected events and unintended consequences become more pronounced. 

My point: very bad idea to put all your eggs in one basket and expect the distant future to rollout as you would like, particularly if your success lies with taking every larger sums of money from other people. In the case of green energy, excessive costs for unreliable and intermittent energy will ultimately come at a political price. Temper the hype and proceed in a reasonable fashion.

P.S. Be careful when using LCOE values, as the technique is easily manipulated by the underlying assumptions buried in the footnotes. End up with comparisons that are clearly tilted to favor one position. 

 

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