Scheer Solar Economy Renewable Energy for a Sustainable Global Future (Earthscan, 2005)

242 THROWING OFF THE FOSSIL SUPPLY CHAINS

construct. No power can be generated, and thus no repayments made, before construction is complete. Installation of micropower plant, on the other hand, is a matter of mere hours, which means that power generation and principal repayments can start at once.

It is not just the fuel savings on wind, PV and hydropower installations that vastly lower the operating costs of renewable energy generation plant: personnel costs are also either non-existent or very low, especially in the case of PV. Monitoring is continuous and usually performed by the individual operator.

The advantages of these installations make them ideal for domestic use. But they also offer an unmatched benefit to power companies as well. Although there would be a need for staff to monitor the plant, distributed power generation from renewable sources is a concert of innumerable independent modules, which means that the risk of costly misjudgements of capacity requirements is virtually eliminated. No longer needing to build large power stations, companies can expand capacity module by module to meet demand, with zero lead time. Where there is excess capacity due to changes in demand or because demand has been overestimated, there is no need to shut down an entire power station: it is sufficient merely to take a couple of modules off-line. Stranded investments can therefore largely be avoided, or kept to a minimal level.

It will already be clear that all calculations that go beyond the capital cost of the technology favour renewable energy. This is most true of PV, which incur virtually no secondary costs. Investment analyses which do not take account of this are incomplete and superficial, stamped from the accounting mould of the existing energy industry. Such analyses also lead to spurious conclusions. The only financial disadvantage that still obtains in respect of renewable energy is the still relatively high cost of the generation plant. This cost, however, can be brought down ever further through technical improvements and industrial mass production, as the history of every technology of the past two centuries has shown.

It is, however, also clear that the cost of renewable energy falls when generated at the domestic level, rather than by power

THE PROFITABILITY OF RENEWABLE ENERGY AND RESOURCES 243

companies. As long as the large power companies refuse to switch to renewable sources, domestic installations do not represent a second-best solution, but rather the superior business model. This becomes all the more clear with the shift from domestic power generation to complete energy autonomy, ie, dispensing with the grid and the associated costs. Standard domestic customers in the EU currently pay €0.10–0.15 (5–7¢) per kWh. By contrast, the published cost of generating electricity in fossil fuel and nuclear power stations is only €0.02–0.04 (1–2¢). If the published cost is accurate, then generation costs account for only 30 per cent of the retail price. The remaining 70 per cent goes on the grid infrastructure and the provision of adequate capacity.

There is thus enormous scope for self-sufficiency and independence from the grid. Deciding whether to move towards self-sufficiency and grid independence is a question of comparing the cost of the generation plant and power storage system together with operating costs with the price of grid electricity. If the capital cost – written down over several years – plus operating cost falls below the price at the meter, then solar energy self-sufficiency is the financially superior investment.

The cost of agricultural energy

The economics of solar energy could be the saving of many agricultural enterprises – an insight that is key to the development of agriculture as a whole.

Agricultural enterprises consume large quantities of energy, including indirect energy in the form of hydrocarbon fertilizers and pesticides produced by the chemicals industry from fossil fuels. This is the greatest single drain on the financial resources of farming businesses, and consequently one of the two main causes of business failure in the agricultural sector. The other main cause is the downwards pressure on farm-gate prices exerted by wholesale traders in agricultural produce and the food-processing companies through the ‘free’ market.

Spending on fertilizers, pesticides and energy makes up 30 to 35 per cent of total agricultural expenditure, which shows up in the statistics as ‘industrial pre-processing’. In the case of

244 THROWING OFF THE FOSSIL SUPPLY CHAINS

arable farming, however, the proportion is far higher than this, sometimes rising above the 60 per cent mark. According to a 1987 study, expenditure on pesticides alone is DM175 (€90; $80) per hectare for wheat, and as much as DM200–300 (€100–150; $90–$135) per hectare for potatoes or sugar beet.2 Aggregate expenditure on direct and indirect energy by the German agricultural sector was DM11.3 billion (€5.8 billion; $5.14 billion) in the financial year 1985–1986.3 The figures are clear: if agricultural enterprises could be spared these costs, their long-term financial viability could be assured, alongside more opportunities for independent marketing direct to the end-consumer. Whereas the latter ultimately depends on the political framework for the market in agricultural produce, farming businesses do have ample scope for breaking away from the use of fossil energy and thereby increasing their returns.

For decades, the maxim was growth or bust – raise yields to maintain revenue. And the only way to do this, the farmers were told, was massive use of chemical fertilizers and pesticides. The outcome was devastating: yields were increased but incomes fell, and ever more family farms were compelled by apparently insufficient size to sell up. Between 1950 and 1970 alone, as this process was getting underway, production – now reduced to single crops – grew by 70 per cent, but consumption of direct and indirect energy and thus energy expenditure also grew several times over. The increased production costs meant that the increased yields actually lowered farming revenues, in a kind of one-off anti-productivity boom. All the indications are that it was not necessarily the fertilizers and pesticides that made these increased yields possible, but the use of agricultural machinery.

In a book entitled Regenerating Agriculture, Jules N Pretty compares the profitability of farms using agrochemical production methods with those forgoing the use of artificial chemicals. Moreover, he compares farms from the same regions, ie, with very similar climate and land quality. The result is striking. Yields are in many cases about the same, but incomes are higher where agrochemical methods have been abandoned, which also benefits the environment.4 Obviously these farms have not forgone fertilizers and pesticides entirely. Instead,

THE PROFITABILITY OF RENEWABLE ENERGY AND RESOURCES 245

using the methods detailed in Chapter 7, they have manufactured their own from agricultural residues, thereby revitalizing the natural circular flow of nutrients. What makes this all the more astounding is that in only a few cases did this approach also include the substitution of fossil fuels with self-produced biological replacements, for which biogas or vegetable oil would be the obvious candidates. This provides scope for significant reductions in another cost factor, roughly equivalent to the savings on fertilizers and pesticides. To realize these reductions, the motors and machinery used in agricultural production would need to be converted to run on vegetable oil or biogas.

Replacing direct and indirect fossil energy with in-house products does make agricultural production more labour-inten- sive, but this is outweighed by the increased returns that result from the cost savings. As production costs fall with the shift away from ‘industrial pre-processing’, this also has far-reach- ing consequences for the scope for cultivating biomass as an industrial raw material and energy source in the future. The agricultural sector gains new opportunities for direct marketing of these resources at lower prices than before, thereby accelerating the move away from fossil hydrocarbons in the chemicals industry and the move away from fossil energy in society as a whole.

PA R T IV

TOWARDS A SOLAR

ECONOMY

Dissenting opinions notwithstanding, a return from fossil fuels to solar energy is inevitable. The only open question is whether this happens in time to avert the impending environmental, economic and political disasters of fossil-fuel consumption, and for new economics to bring new ecological stability. The first half of the 21st century will decide the fate of human civilization. Assuming each generation of responsible economic agents spans around 30 years, it will be the next two generations who will have to make this process of eco-industrialization happen. The dangers are too great to risk further procrastination. It is high time the world drew back from the precipice to which fossil fuels have brought it.

Ever more frequent and ever more devastating environmental catastrophes are a warning we dare not ignore. Such disasters are happening earlier and more often than even critical climate researchers dared to predict: 707 in 1998 alone. The World Disaster Report published by the Federation of International Aid Agencies lists around 60,000 lives lost; the El Niño weather disturbance alone cost 21,000 lives; Hurricane Mitch in Central America 10,000. The floods in China affected 180 million people; there were also a further 240 storms and 170 floods affecting a total of 200 million people. The droughts resulting from climate change in Indonesia led to fires in rice paddies and forests which caused a pall of smoke that darkened the skies over southeast Asia for weeks. Who could fail, in such circumstances, to have an inkling of how the end of a civilization with a pyromaniac energy system might look?

248 TOWARDS A SOLAR ECONOMY

Environmental disasters forced 25 million people to flee their homes; Munich Re estimates the bill to be $90 billion, versus $30 billion in 1997.1 The consequences for the refugees, from cultural uprooting to social destitution, are incalculable. That most of these catastrophes result from the meltdown of the fossil energy age is something that only the terminally blinkered can now contest. The countdown has begun, and the time bombs are not just ticking more loudly now: many have already gone off.

Dissenting opinions are now rarely to be heard. Nevertheless, despite all the warm words for renewable energy, the business and politics of energy supply carry on regardless. Actions in practice work more against the alternative that in its favour. For top of the agenda in politics and business is not the restriction, but rather the encouragement of conventional energy consumption. The most obvious option, using tax increases to restrict consumption across the board, has been inadequately enacted. Instead, national and international political initiatives are deliberately seeking, in the expectation of general approbation, to lower the cost of energy. Dismantling global trade barriers and new market structures in the electricity and gas industries have resulted in a fall in prices that will lead to an unfettered continuation of the orgy of energy consumption for a long time to come. No attempt has been made to counter these falls with appropriate rises in energy taxation. It is impossible to conceive of a wider gulf between understanding and action, at a time when a sustainable and risk-free solution to humanity’s perennial problem of energy supply has come within reach.

Across the world, the last market barriers facing suppliers of conventional energy are falling. Just as with the telecommunications industry before it, the area monopolies of the gas and electricity industry are being rescinded. The electricity oligopolists and monopolists, though, are no less powerful for it. New entrants do now have access to once-closed market segments, which at first sight is a welcome development, as the ossified structures of past decades can now be broken open. Proponents of green alternatives have – all too precipitously – welcomed the opening of the energy markets for precisely this

TOWARDS A SOLAR ECONOMY 249

reason. However, the market power and financial strength that the energy companies were able to build up under the system of regional monopolies gives them a head start in the liberalized energy markets. While the ex-monopolists certainly compete with one another, they also have the capacity to effectively stymie new entrants offering greener products. The most likely result will be a ‘clearing’ of the market – a market for ever fewer, ever larger electricity companies. De jure, there may be more opportunity for independent supplies of green electricity from local micropower plants; de facto, the development has made life difficult for municipal corporations and for those trying to bring renewable energy onto the market.

The behaviour of governments in pursuing energy market liberalization with the sole object of securing lower energy prices, while simultaneously encouraging the process of concentration in the energy industry, is inexcusable. Scarcely a merger or acquisition has gone by in the electricity industry that was not welcomed or even initiated by the governments concerned. Energy markets that do not give precedence to renewable energy, price cuts without effective environmental taxation, the encouragement of mergers and acquisitions at the cost of local solutions: such policies represent an intellectual step backwards and are all but irresponsible.

To bow to the premise that energy can only be supplied within structures predicated on the consumption of fossil fuels is to don an intellectual and practical straitjacket – in science as much as economics, in politics as much as culture. It becomes impossible to conceive of a world in which solar replaces fossil energy, or that this could bring advantages for civilization as a whole. It also becomes hard to design an appropriate strategy, for which the aim must be to harness the power of solar energy through an optimal structure for this energy source. Only in this way can solar initiatives be liberated from the snares and obstructions of the fossil-fuel economy.

Nevertheless, the view that solar energy and resources should be exploited within this structure and integrated into the existing system is widely held, even among supporters of the solar alternative. Adapting to structures more suited to the natural, technological and economic potential of solar energy,

250 TOWARDS A SOLAR ECONOMY

on the other hand, means thinking outside the box. This is easy, and yet hard at the same time: easy, because second thoughts cost nothing and anyone can have them; hard, because it means, in effect, having to think in a totally new direction. The ‘grand strategy’ for the transition to a solar global economy is a transnational social project that has to be realized by innumerable agents and in countless steps, small and large. Every step has a value, in that it brings the shift to a new economic base closer. Some courses of action will meet obvious limits; other cross boundaries and break new ground. These are the courses of action we must pursue. In A Solar Manifesto, I set out a broad palette of possible initiatives, which I will not repeat here.2 Instead, I address two questions:

1Which initiatives are capable of side-stepping or overcoming existing structural obstacles in order to accelerate the take-up of renewable resources? The pace has patently been too slow thus far; if it is to be stepped up, all policies have to be evaluated for their potential scope.

2Which policies are required in order to dethrone the fossil resource industry from its current hegemony? The desire to effect change cannot be reconciled with a hands-off policy on precisely those structures of the fossil resource industry which are the mainspring of its enduring expansion in the energy, raw materials and foodstuff sectors.

It is a question of which are the fastest roads, and these will not necessarily be the most direct or the most comfortable. The way must be marked so that ever more agents can follow it. It is not just a matter of what is simplest to achieve and therefore the pragmatic response now. The modern fixation with what looks possible today dulls the eye for what will become indispensable – and then achievable – tomorrow or the day after.

C H A P T E R 9

Exploiting solar energy

ANY STRATEGY FOR an across-the-board introduction of solar resources will be inappropriate or limited in scope if it does not also provide for the strategies of individual energy companies. There is a wide variety across the industry in terms of the way that these companies are responding to change and to new challenges. Some are looking to the oil fields of the Caucasus rather than those of the Middle East; others are seeking to tap ‘non-conventional’ fossil fuel reserves, whatever it may cost; others still are refocusing from oil to gas; some are diversifying their businesses into areas other than energy. A few are thinking further ahead and beginning to diversify into renewable energy by starting up appropriate subsidiaries. Notwithstanding these differences, there are four broad patterns which can be discerned:

1Heightened industrial concentration, with political backing, through strategic mergers and aggressive competition against smaller firms. The public is left with the impression that energy firms are becoming increasingly dominant, and that the need to accommodate to their wishes is greater than ever. In reality, these firms are mustering their strength for a last life-or-death struggle.

2Attempts to meet political demands for global climate protection in a way that does not call the future of the nuclear and fossil energy business into question. This is the motivation for proposals such as tradable global emissions rights: ‘Yes there must be change, but not in my back yard!’

3As energy companies have realized that their strategy of categorical rejection of renewable energy (apart, of course,

252 TOWARDS A SOLAR ECONOMY

from the highly profitable hydropower dams that have long since formed part of the energy mix) is no longer tenable, they are attempting to ensure that renewable energy reaches the market on their terms.

4A drive to bring energy suppliers from different sectors together to develop integrated services, albeit in a way that suits the energy companies, ie, within existing hierarchical structures.

It is important to bear these trends in mind when evaluating renewable energy strategies. As desirable as it may be to compel energy companies to do their bit for the transition to a solar global economy, through public pressure, persuasion or governmental fiat, it is unrealistic to expect companies to willingly substitute renewable for fossil energy – ie, to act against their own interests. Even if the factors discussed in Chapter 2 make it impossible to control renewable energy supplies in the same way as fossil or nuclear energy, who sets the pace and whose interests prevail remain questions of fundamental importance. It has been and continues to be independent agents without wider connections who lead the charge: grass-roots organizations, individual operators, new companies, municipal utilities, politicians. It is these agents who have mounted the public education campaigns and prepared the market for solar technology. Rather than relying on corporations and governments to take the reins, these organizations need support in their work. ‘Wir haben verstanden’ (we have understood) – that was the slogan adopted by the German Social Democratic Party (SDP) after its poor performance in the 1999 elections to the European Parliament. The current situation in the energy markets shows just how few really have understood – particularly in respect of the electricity market, where the lure of cheap electricity from conventional sources is being held out to tempt consumers to buy into the destruction of their own future.

The transition to a solar global economy cannot be achieved without the combined activities of local and independent agents and innumerable small investors. They are what is needed if the technologies and proposals for exploiting solar resources are to be developed to the point where they become