Economic justice in the emerging energy system

By Dr Amanda Cahill, CEO of The Next Economy

Australia is in the middle of a transition of historic significance. While politicians continue to argue about the necessity of transitioning our electricity to 100% renewable energy, it is already happening. We have all the technology we need to transition Australia to 100% renewable energy and we can make this transition in as little as ten years. Renewable energy can deliver a reliable and abundant supply of energy to all, and we can afford to do this in an orderly and managed way.

The transition is inevitable, but we must make sure that it is going to offer social, economic and political benefits as well. At this moment in history, we are gifted with a unique opportunity to transform not only the energy system but our economic system as well. Whether or not this transition leads us to a fairer economic system or consolidates or increases inequality though, is not yet known.

From an economic perspective, there are three pathways that could get us to 100% renewable energy, based on the current system. We have private corporations, we have government-owned or publicly-funded generators, and thirdly, small-scale community-owned renewable energy projects. All can deliver 100% renewable energy, but they do so with very different social, political and economic ramifications.

First, let’s talk about private companies. They are the largest generators in Australia and view electricity as a commodity to be traded competitively, to generate profits for shareholders. Increasingly, we are seeing private companies actually become advocates for the transition to renewable energy. For example, we have AGL who is leading the way in standing up to government and saying that we need a policy that enables the investment to flow to renewable energy. Companies are doing this because, in their own words, it makes good business sense.

This is good news for the environment, given the scale and their ability to leverage the investment they can get us there fast – if the right policy mechanisms are in place to incentivise this. But as we’ve seen all around the world, there is also a significant risk on relying on the market to deliver during times of disruption. In times of change, there’s always the risk that we could end up expanding capitalist control. This could leave Australia vulnerable to the kinds of problems we have seen in other places where basic services such as energy, water and food have been more fully privatised, creating higher costs and less reliable supply, particularly in areas that are difficult to reach or in lower socioeconomic areas. We’ve also seen the use of public money to then subsidise private profits. But, even if we could ensure through regulation that this didn’t happen here, there’s a more fundamental question to explore: given the potential of renewable energy technology, which can decentralise and democratise both the production and the sharing of profits, why would we want to consolidate the wealth, power and often foreign interests?

This is the question being asked by proponents of the second model, which is government-owned generators. At the moment they operate on very similar lines to a private company, but it is a different model. We’ve seen different parts of the union movement are increasingly advocating for government ownership, as a way to get us to clean energy much faster. They argue that it would enable a smoother transition because it can be managed from the government level; it ensures universal access to electricity supply because it’s a public good that everyone has a right to; and we could ensure that we have much better, decent working conditions and new employment and training opportunities for workers, particularly in areas where it’s needed most. The unions also argue that instead of using the money to subsidise the private sector, as is happening now, we could actually invest that in an income-generating asset for the future. So, I must admit from a justice perspective this is sounding a lot better than the private model, but it’s only going to work if we have genuine and strong political commitment to transition away from coal and gas, which, despite significant investments in renewable energy, still remains to be seen.

The third business model operating in the energy sector is the community energy model, where community groups build their own renewable energy, generally solar or wind farms. According to the Community Power Agency we currently have over 90 community-owned renewable energy projects across Australia. Proponents of community energy argue that the very nature of the technology enables the kinds of decentralised decision making and control that allows for more equitable sharing of economic benefits by producing local jobs, making sure money stays in the local area and funding community activities.

Underpinning this model are ideals such as climate justice, energy sovereignty, local resilience, participatory democracy and protecting the commons. This is particularly exciting given the potential of this to address historical inequalities and also geographic disadvantages. For example, Aboriginal and Torres Strait Islander communities in remote areas could be among the first communities to benefit from everything that energy sovereignty has to offer.

This economic model is the polar opposite of ‘business as usual’. It’s small-scale rather than large-scale, it’s distributed rather than concentrated in its ownership, and it is an example of localised production, consumption and profit sharing. However, there are not insignificant challenges to community energy projects that still need to be overcome. From raising the necessary capital to having the expertise locally, to dealing with the more powerful players in the energy market – we’re already seeing many barriers to people getting these projects off the ground. Furthermore, some would argue that community energy doesn’t necessarily lead to a more equitable system, and it could leave some communities even more energy insecure if we undermine the current, centralised grid.

So where does all of this leave us in the pursuit of a more just energy system, that ensures affordable and secure energy for the future? At the moment we’ve got a mix of all three models, and in some ways, that diversity is the key to resilience if we have the right policy in place. All three models can get us to 100% renewable energy, but there are some really important questions that we are not addressing in the public sphere. For example, what are we actually talking about when we talk about ‘energy’? Is it a commodity that we trade? Is it a public good or an essential service? Or, is it a fundamental human right? Because, how we think about energy is going to lead us down very different economic pathways.

What do these three systems mean for how wealth is concentrated or distributed? Do these models foster greater democratic participation or do they leave us more vulnerable to inequality? And who do we want controlling a resource upon which we all depend? Getting this right means the difference between consolidating the very same capitalist economic system that has led us to this climate crisis in the first place, or it could lead us to economic models that hold the potential to redistribute wealth and power in ways that leave us all much better off. How it’s going to play out, we’re going to have to see… but the choice is ours to make.

Amanda Cahill is the CEO of The Next Economy. Originally trained in Anthropology, she has spent over two decades working with communities across Australia, Asia and the Pacific on projects designed to develop more equitable and sustainable local economies. Over the last few years, she has been working with coal and gas affected communities in Australia to develop economic transition plans that will move Australia closer to zero emissions in socially just ways. Amanda has a PhD in Human Geography from the Australian National University, an Adjunct Lecturer position at the University of Queensland and also helped found the New Economy Network of Australia.

Header image: solar panels installed on the roof in South Australia by amophoto_au via Shutterstock, photo ID: 513272902.