The Price is wrong: Why capitalism won’t save the planet explains why the model used by market-enthralled governments will not save us from climate catastrophe, finds Orlando Hill

Price plays a crucial role in the basic orthodox (neoliberal, neoclassical) model of how a market economy functions. Any Economics A-level student can explain that price, steered by the impersonal forces of supply and demand, should behave as a transmission mechanism that sends out the essential information to buyers and sellers, creating incentives to increase or decrease the supply and demand of a commodity depending on its direction of travel.

If the price falls, it extends the demand for the commodity, creating incentives for new investments. The price of electricity generated by renewables (mainly solar and wind) has been ‘plunging’ (p.125) since 2013. As a result, what should happen is that firms should move away from fossil-fuel-based energy to solar and wind power. But that is not what is happening. Why it isn’t is what Cristophers explains in this very in-depth book.

The main problem with both the mainstream economists and Keynesians is that their models are price-based theories. To be fair, in Keynes price does not play such an important role as it does in the orthodox model. Keynes introduces an element of subjectivism and understands that it takes time for prices to adjust.

A better understanding of how the economy actually works (although not as mathematically elegant) can be found in the political economy defended by Adam Smith, David Ricardo and Karl Marx. Capitalists are not concerned about cost saving, but about the rate of profit. If there is no prospect of profitability, capitalists do not invest. Christophers refers to political economy as a profit-based theory.

As Christophers points out, markets cannot be seen as a neutral playing field where buyers and sellers meet to agree on a price. Markets are shaped organically by the intervention of firms and governments. What has happened to the electricity sector since the 1980s is part and parcel of what has refashioned political economies at large, i.e. neoliberalism. Competition, privatisation and marketisation (the buzzwords of late capitalism) have led to a fragmentation of the sector, with firms competing against each for the share of profit.

Prior to the neoliberal onslaught, the energy sector around the world was largely vertically integrated. The generation and distribution of electricity was controlled by one firm and regulated by the government. In such a structure, it is possible to pass on innovation and cost-saving procedures to other parts of the same firm. With the unbundling of the sector, what were departments of the same firm became separate companies competing against each other instead of collaborating under the supervision of the government.

Contradictions of energy markets

It would seem that the owners of solar and wind-powered electricity generators would have the competitive advantage over fossil fuels. Solar and wind energy are free gifts of nature. A large-scale solar or wind facility might cost a significant amount to build, but it costs nothing or very little to operate. There are no fuel or extraction costs. Nobody enjoys private property rights. In economic jargon, there are no marginal costs. In other words, there are no extra costs in generating an extra unit of energy.

The problem is that the price of generated energy is dictated by gas and not renewable energy. From the perspective of the distribution of electricity, it does not matter how the energy is generated, whether by renewable or fossil fuel. What the distributor considers when acquiring the energy is the price and availability. Christophers explores the vagaries and complexities of the energy markets to show why renewables are consistently at a disadvantage in the neoliberal market structure, such that fossil fuels remain preferential from the point of view of profit-seeking finance investment at every level.

Another problem, which Christophers does not explore, is that since wind and sun are free gifts of nature, there is no, or very little, labour used in the generation of solar or wind-powered energy. If there is no labour, no surplus value can be extracted. As we know, profit is derived from the surplus value that is extracted from labour. Profits in the fossil-fuel sector derive from the circulation of commodities within the market, but renewables do not generate that commodity circulation, and so don’t generate the surplus value upon which profits depend.

As we have seen, large-scale wind or solar-energy facilities cost a significant amount to build. Debt instead of equity (selling of shares) is the preferred way of funding the investment. That ties the renewable sector to financial institutions and consequently, it is at mercy of interest rates and monetary policies. Because of the large startup costs, investors demand some sort of security which can only be given by governments. Neoliberalism preaches against government intervention.

Even though the proportion of electricity generated by solar, and wind is increasing and even overtaking fossil fuels, the overall demand for electricity is also increasing. In absolute terms, energy generated by fossil fuels is on the rise. Solar and wind still need a backup for when the sun does not shine, and the wind does not blow. That explains why China is the main investor in renewables but also the main builder of fossil-fuel plants.

This is a very brief summary of a very thorough book. I imagine most readers will find it difficult to plough through it. But those who do will find it instrumental for cutting through the nonsense that is fed to us by the mainstream media. The book does not give any possible solutions under the present form of neoliberal capitalism. But after reading the book, it is clear what the solution is. The market in energy needs to be restructured from the base upwards; this can only be done if it is taken into public ownership and out of the profit system entirely. If we want an energy system based on renewables, we need to put it beyond the reach of the capitalist market.