All That Glitters Is Not Green: Debates Surrounding Energy Transition Image Taken from Pixabay.Com

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ROSA LUXEMBURG STIFTUNG July 2018 | n.18 All that glitters is not green: debates surrounding energy transition Image taken from pixabay.com

With radical proclamations a thing of fuels? And if they are, at whose cost and whose the past, the global energy transition towards gain? And what would it mean for the left, if renewable sources is gaining traction with and sustainable capitalism were achieved through becoming a priority for the market´s heavy market mechanisms? Would that mean the weights: the largest European bank, HSBC, and only variable in the energy debate is climate the World Bank are to cut fossil fuel financing; change? Let us examine, therefore, why and for companies such as Total and Shell will partly di- what the advancement of renewables is a stra- versify and electrify; the giant Norwegian sov- tegic matter from a left-wing viewpoint, so that ereign wealth fund is to sell off its investments we can evaluate accurately both the transition in hydrocarbons and coal; in 2017 there was towards a different energy matrix and the con- more investment in solar than in fossil fuels and sequent impacts and risks. Let us look at why nuclear energy. The objective of all these mea- analyzing this change of scenario will improve sures is to achieve a “carbon neutral” economy the development of transition strategies and by 2050, as defined in the Paris Agreement. positions, many of which are already being for- Latin America is playing a prominent part in mulated. We must simply remain vigilant. these efforts, as its renewable energy supply is The contributors to this edition of Punto double that of the global average. Almost half de Debate are Argentine researcher Bruno For- of Uruguay’s energy supply is wind and solar, nillo and Nadja Charaby, global affairs advisor another important recent achievement. at the Rosa Luxemburg Foundation. Focusing Thus it would seem that our world is en- on the Southern Cone and Germany respec- tering a “green” phase, with our region taking tively, they detail what is happening in these the lead. But is this really the case? Are renew- contrasting regions, where there are a number ables really taking over the market from fossil of noteworthy overlaps. 2 Where is the energy transition in Argentina, Chile and Uruguay heading?

BY BRUNO FORNILLO*

A major transformation of the Southern Co- first time, and the goal was established for at least ne’s predominantly fossil fuel-based energy pattern is 20% of the nation´s electricity to come from alter- underway. The “Uruguayan success story” has gained native energy sources by 2025. With a green-friendly international recognition: positioned among the top aura of clean energy and a commitment to comba- four countries with the highest percentage of wind ting climate change, these Southern Cone countries energy in the world, its electricity grid is fueled almost seem to be changing course. However, in spite of clear exclusively by renewable energy. Chile, influenced by indications that the “black gold” era is coming to an the neoliberal tradition and by its desire to view itself end, in all three countries energy consumption has as a “modern” country, saw Sebastián Piñera take offi- continued to grow and the burning of hydrocarbons ce in March 2018 and immediately announce that the still predominates, accounting for over 70% of the to- country would have a 100% decarbonized electricity tal supply in Chile and 80% in Argentina. This begs the grid by 2040. In Argentina, a program incorporating question: Are we really heading towards transition? wind and solar energy has had relative success for the And if so, is it a comprehensive one?

THE TWILIGHT OF FOSSIL FUELS Historically, the drive towards alternative to start importing fuel at high prices in order to sources in the Southern Cone has been linked meet domestic demand. It didn’t take long for to the current depletion of conventional oil and both countries to realize that the potential use gas reserves, the neoliberal pillaging of resources of the energy circulating in their biosphere con- in Argentina and the breakdown of the regional trasted with the almost total absence of fossil fuel energy market. In fact, in 2004 Argentina began reserves. Although the current energy transition to experience domestic energy supply shortag- in all three countries is linked to global trends, it es, had to import energy - which over time com- especially falls within the framework of the su- pletely upset its balance of trade - and stopped premacy of market-based dynamics and the rela- gas shipments to both neighboring countries, tionship of the energy sector with the extractive despite commitments made in the 1990s. As a pattern that predominates in South American consequence, Chile and Uruguay suddenly had “growth” models. Photo by Denniz Futalan from Pexels

All that glitters is not green: debates surrounding energy transition, by Bruno Fornillo and Nadja Charaby PUNTO DE DEBATE

3 DEVELOPMENT PROFILE: DECARBONIZATION, PROPERTY AND TECHNOLOGY

To critically assess the energy transition pro- In terms of investment, the relatively success- cess in the Southern Cone it is crucial to ask to what ful alternative energy bidding rounds launched by extent policies designed to reduce energy consump- Argentina in 2016 and 2017 aimed to open up “fu- tion have been implemented, ‘energy justice’ promot- ture energy revenue” to capital and to achieving low ed, or technological innovations and synergies estab- generation prices. The winners were a combination of lished in local areas. local and international companies, financed in inter- In Chile, attention is often drawn to the speed national markets or in China, which are guaranteed a with which wind, solar and mini hydro power was es- return on investment because the payments are ulti- tablished. While in 2012 non-conventional renewable mately backed by the World Bank. If Argentina’s target energy sources generated 0.95 gigawatts (GW), five is achieved by 2025 (20% alternative and renewable years later that number climbed to 4.8 GW. These data energy use), only 2.8% of the total grid will be clean, are significant, but wider issues need to be considered because the real stakes are on the exploitation of Vaca ¬- although wind generation increased by 422% in Muerta, the world´s third-largest non-conventional the last ten years, it produces only 2,109 tera calories gas reservoir. Other factors that threaten the target (Tc). In contrast, coal increased by less, 150%, but gen- include the fact that the same amount of thermal en- erated an astonishing 86,113 Tc - forty times more. In ergy as renewable energy has been granted contracts, short, solar and wind power currently account for less while fossil fuel subsidies in 2017 amounted to almost than 1.5% of Chile’s primary energy sources. 9.5 billion dollars (5.6% of the national budget), ac- At the same time, if we look at the whole pic- counting for 1.74 of the GDP. ture, the fact is that between 2006 and 2016, con- Finally, Uruguay is no stranger to this general sumption increased steadily, showing an 18% increase trend of the increasing importance of private capital by the end of the period. This growth was based on in energy generation, with the introduction of alter- coal - essentially imported from Colombia -, which in- native energy resulting in privatization in a country creased from 6 to 26% and became the main factor that prided itself on not having sold its public compa- in the current scenario. Consequently, ten years after nies: only a small number of the newly installed wind Argentina made that cut, greenhouse gas emissions turbines - 5.5% of capacity - are in the hands of the increased by 30%. In this regard, Chile’s expectations state-owned National Administration of Power Plants with respect to the virtues of its transition must be and Power Transmissions (UTE). It is because of this qualified: there has been no mass introduction of al- green capital income that the powerful local union ternative sources, no consequent decarbonization, no - UATE - has strongly resisted the process, criticizing combating of climate change and no decrease in con- the more expensive electricity bills, which transfer the sumption - in fact, quite the opposite. Furthermore, cost of renewable energy production under private the construction of small and medium-sized hydro- control to the population. power plants in the south of the country brought with At the same time, the Southern Cone as a whole it serious socio-environmental consequences, such as has yet to get behind a strategy to establish the base the flooding of Mapuche lands, which sparked fierce industry of the new and emerging energy paradigm. resistance from indigenous peoples. The use of national industry or policies that foment On the other hand, Argentina was a pioneer of “technological equalization” is almost completely ab- a policy of self-sufficiency and public control when it sent in Argentina (approximately 10%) and non-exis- created the company Yacimientos Petrolíferos Fiscales tent in Chile, while in Uruguay efforts were directed (YPF) in the 1920s. However, in the 1990s YPF was pri- towards services and civil infrastructure rather than to vatized and the sector as a whole deregulated; a sim- technological packages made in or created by China, ilar situation to what happened in the electricity sec- the United States, Spain, or others. In the region, only tor. A wave of privatization was experienced that Chile Brazil tried to draw a national technological border by had undergone years before under Augusto Pinochet. demanding a qualitative and increasing share of com- Government policies on renewable energy continue plex parts, something that the government of Michel in this vein, in the context of a clear predominance of Temer cast aside. the private sector.

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ABYSS OF FOSSIL FUELS, SOCIETY AND TRANSITION

Ultimately, the power supply was neither decentralized nor de-commodified, and nor was a strategy for developing local technology designed. So let’s ask ourselves: For what and for whom do we want renewable energy? Let’s go back to the example of Uruguay, which is perhaps the most advanced, in order to rethink this process. The first point to note is that the country increased its consumption signifi- cantly: an item that in 2006 required 2,400 ktoe (thousands of tonnes of oil equivalent), ten years later needed almost twice as much energy: 4,600 ktoe. What happened in between? In essence, industrial growth of a very particular kind. In that first year, the industry´s consumption accounted for 23%; a decade later, 42%. Within this, the consumption of pulp and paper went from zero to 1,300 ktoe, accounting for almost a third of Uru- guay’s entire energy requirements. Where did these copious amounts of energy come from? In 2006, biomass - organic matter originating from photosynthesis – generated Photo by fotografierende from Pexels less than 50 ktoe, but ten years later it generated 1,200 ktoe. In a nutshell, Uruguay now uses more biomass-based energy than oil, but one third of the renewable energy introduced goes directly to the pulp and paper industry (which in turn sells the surplus energy to the system, making it a business unit in itself). A similar picture could be painted for Ar- gentina or Chile. In the latter, for example, a large part of the energy produced is used to sustain the maelstrom of the extractive industries: the trans- port and mining sectors account for 71% of consumption. Such phenomena and data show the intrinsic and crucial link between energy trends and the accumulation of capital in the Southern Cone, where low levels of industrialization or pure “export of nature” prevails.

All that glitters is not green: debates surrounding energy transition, by Bruno Fornillo and Nadja Charaby PUNTO DE DEBATE

5 Colectivx Fotográfico Veinticuatro/Tres. Antofagasta, Chile

In addition to this structural issue, public policies change, and until energy socio-territorial conflicts come into play, is conceived of not only as a universal ri- conflicts that are continuously on the ght but also as a political weapon for ra- rise, especially in light of the scope of the dical democratization. energy and mining model. At the same In short, if the energy transition time, energy poverty is increasing under has really begun, the key questions to ad- the current model of renewable energy dress are where it is heading, how it will expansion. Virtually the entire Urugua- happen, who stands to win and who to yan population - who pay the most ex- lose. A “comprehensive” approach, which pensive rates in South America - is poor is currently lacking, must be adopted. in this regard since more than 10% of its Thus it would seem we are faced with income is allocated to it. The problem of two potential and contrasting scenarios: high rates is another one of the central on the one hand, the chasm between the points of debate in Argentina, where the increase in consumption and shortage recent increase in rates averaged 900%, of energy, conceived of as a commodity, and provoked intense protests. Of course, could widen, and as a consequence “ex- this onslaught is being analyzed by the treme energies” such as fracking could social and union movements; meanwhile be resorted to, and an external technolo- alternatives are being sought: for exam- gical neo-dependence could be created ple, in Argentina about 400 cooperatives under a pattern of regional disintegra- are seeking to establish their own power tion. On the other hand, as an alternative, generation. However, there is still a long the Southern Cone could head down the way to go until energy becomes a topic path towards renewable and sustainable of organic public and cultural debate energies, heightening industrial density in civil society, where how to introduce and local technological frontiers on the distributed power generation on a large premise of democratizing the system scale is discussed - the three countries and creating local solutions with a regio- featured in this article have laws to make nal vision; because, ultimately, energy is this possible, but they are not yet in force. a human right and a pillar of the design There is also still a long way to go until of future autonomy.

Rosa Luxemburg Stiftung 6 Image taken from pixabay.com

Lost in transition: EU and Germany fail on new energy path

BY NADJA CHARABY**

The European Union (EU) will imminent action for our planet prevails. not reach its climate targets and Ger- This teaches us two things: firstly, that many will remain a climate criminal: climate energy policies remain under the the energy transition is failing, including control of corporate lobbyists or even, as the most recent and widely celebrated cynical as it might sound, under the in- Energiewende. Once upon a time, Ener- fluence of coal companies. Secondly, the giewende gave us glimpses of hope for market-based approach to developing a fundamental change in the system, the renewable energy sector that has namely a democratization of the energy been adopted over recent years has not sector that would challenge neoliberal resulted in any kind of profound transfor- privatization hype. However, nowadays mation towards a more climate-friendly not only have we not seen an increase or ‘socially just’ energy and economic in the share of renewables, but political model. The same applies to the situation ignorance regarding the urgency to take in the EU as a whole.

All that glitters is not green: debates surrounding energy transition, by Bruno Fornillo and Nadja Charaby PUNTO DE DEBATE

7 THE SITUATION IN THE EU: RENEWABLES, GAS AND PRIVATIZATION ON THE RISE

To reach its target of at least 40% energy sector, as demonstrated by its cuts in carbon dioxide emissions for the recent austerity policies in, for example, year 2030 compared to 1990 levels, the Greece, Portugal or Spain. Recent de- EU recently set a more ambitious objec- velopments in Spain, where the green tive: to increase the share of renewable energy sector has more or less been energy from 17% to 32%. This decision completely liberalized, show a run of could be seen as a small success on the international investment companies on path towards more climate-friendly en- Spanish wind and solar farms, from in- ergy policies. However, an examination vestment company KKR & Co. to Black- of the reality of climate action in Europe rock and German investors. reveals a sad picture. According to a re- These trends show us the limita- cent study by Climate Action Network tions of the transformative nature of re- Europe, all EU member states are failing newables per se, as we will continue to to meet their pledges to reduce green- detail. Furthermore, it is evident that the house gases as established in the Paris renewable energy sector is not immune Agreement. Furthermore, the former to capitalist market-based approaches, poster child of climate action, Germany, having instead become a most welcome is ranked only at number seven, accord- asset for investment sector stakehold- ing to the report. ers. Furthermore, to address energy This critical situation is under- transition as a whole, a rather complex pinned by two other significant issues. analysis of European and German poli- The first is the labeling of gas as “bridge tics would be necessary. We would have fuel,” promoting it as climate-friendly to take a closer look at the spin for pri- or a necessary partner for the develop- vatizing the energy sector, at the cor- ment of renewables, despite the fact it rupt car industry, at the blindness or ig- has been proven to have a greater im- norance of the aviation and agricultural pact on the climate than coal, and de- sector regarding reducing emissions, as spite the damage caused by pipelines well as the influence of fossil-fuel indus- to the environment and to nearby com- tries within Europe. This goes beyond munities. To this end, reports show that the scope of this contribution. The main the gas industry spent approximately argument we want to analyze here is 100 million euros in 2016 on lobbying the failure of Energiewende as a result decision makers in Brussels. The second of its reliance on a market-driven energy issue is the EU’s push for further neo- transition and its sole focus on electric- liberal privatization of public services ity production, neglecting to take other in general, including the renewable sectors into account.

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ENERGY TRANSITION MADE IN GERMANY – WHAT STARTED OUT AS A SUCCESS MODEL

In order to grasp the initial success emphasized that the decision to trans- of Energiewende we must understand that form German’s energy system was a po- the whole project was a result of social litical decision, not a market-based one. struggles that began back in the 1970s. As a result of pressure from society and Since then, environmentalists, especially progressive political decision-making, the anti-nuclear activists, together with pro- development of new technologies and gressive scientists, have fought for an al- their economic competitiveness led to ternative to the existing nuclear-based en- this large-scale shift, not the other way ergy production. As early as 1991, an initial around. Furthermore, this technological law was enforced that subsidized renew- development brought with it a change in ables with a special feed-in tariff. The fol- the ownership structure of electricity pro- lowing revisions of the Renewable Energy duction sites. Due to the feed-in tariff sys- Act in the year 2000 managed to establish tem, as well as favorable loans, suddenly a foundation for the further development every homeowner could become an elec- of the renewable energy sector, although tricity producer by installing solar panels the sole focus was electricity production. on their roof top. Since 2009 it has been The 2009 version of the Act set the target possible to observe an in the establish- of reaching 30% renewables in the German ment of energy cooperatives or communi- electricity mix and 14% in heat production ty energy companies; local governments by 2020. Since 2002 the share of renew- started to re-municipalize the energy ables in the German energy mix has risen supply and even the electricity grids that continuously. While Germany´s electricity had been privatized throughout Germany needs remains, on average, 500 terawatt following the neoliberal energy sector re- hours (TWh), wind power generated elec- forms of the EU in the 1990s and 2000s. tricity has risen from 15.8 TWh in 2002 to By the end of 2016, for example, a study over 80 TWh in 2017, and solar energy has by the Leuphana (University of Lüneburg) risen from 0.16 TWh to more than 37 TWh counted more than 1,700 community en- in the same period. ergy companies in Germany. The overall But not only the technical numbers conclusion drawn is that these companies must be considered when evaluating En- and the energy cooperatives have been ergiewende’s success. If we want to dis- the driving force behind the development cuss its positive aspects, it must first be of renewables.

All that glitters is not green: debates surrounding energy transition, by Bruno Fornillo and Nadja Charaby PUNTO DE DEBATE

9 Image taken from pexels.com

RENEWABLES ARE NOT BEATING FOSSIL FUELS, NOR HAS THE OLIGOPOLY BEEN DISMANTLED

Despite the initial success of the compete with the (neo)liberalized renewable energy sector, fossil fuel energy market. It was the consumer, energy production has not decreased then, specifically at the household lev- accordingly: the share of lignite only el, who had to subsidize Energiewende sank from 140.5 TWh in 2002 to 134.9 through skyrocketing electricity bills. TWh in 2016 and the share of hard coal An average household in 2014 had to fell by about a tenth, to approximately pay around 70% more for its electricity 100 TWh in Germany. And it is still an than in 1998 despite the continued de- oligopoly of the four so-called energy crease in the production costs of renew- giants (E.ON, RWE, EnBW and Vatten- able energy. This absurd development fall) that dominate energy and electric- is caused by a complex electricity price ity production and supply in Germany. exchange, which has decoupled the Although their market share is slowly reality of electricity generation prices decreasing, they are the ones who are from the prices paid by the small-scale mainly responsible for nuclear and end user. This development can be coal-fired energy production in Germa- viewed even more cynically when we ny. In essence, this means that Germa- understand who actually profits from it: ny is going to miss its climate protec- energy suppliers, who do not immedi- tion targets since it not addressing the ately transfer reduced prices to the end core problem. user; and large-scale consumers, such As stated above, the reasons for as the German car industry or chemi- this are manifold. On the one hand it has cal industry, who directly purchase the become obvious that Energiewende electricity from the exchange market did not dare challenge the market-ob- at lower prices. Therefore, we can even sessed paradigm that dominates the go so far as to say that Energiewende energy sector, meaning that renew- has actually subsidized German pollu- ables are accepted as long as they can tion industries.

Rosa Luxemburg Stiftung 10 GREEN JOBS WERE AN EMPTY PROMISE AND A JUST TRANSITION IS NOT ON THE HORIZON Furthermore, we are dealing with a with establishing a date for the German coal one-way discourse as the decision to phase phase-out in addition to a just transition for out coal in Germany is closely and compre- the affected workers. Given that commission hensibly linked to the question of jobs. The members from political parties and repre- number of workers affected, who depend sentatives of federal governments who have directly or indirectly on coal-fired electricity thus far neglected to accompany the ener- production varies from, depending on the gy transition with a fundamental structural source, between 21,000 and 70,000 people. transformation of the economy, and in light The ‘green jobs’ argument, i.e. that the re- of the fact that representatives of the fossil newable sector would also create jobs, has fuel industry itself are negotiating this deci- failed to fulfil its promise so far. It has not sion, we do not have much hope that a de- only – due to the German solar industry’s cision will be made that takes into consider- economic problems, for instance – failed to ation the global responsibility for ecological create enough jobs, but those that were cre- justice. What can be expected is, once again, ated are rather precarious compared to those a decision that places much higher value on in the traditional energy sector. jobs in Germany than on the lives of the peo- We consider this to be another argu- ple and communities who suffer the impacts ment that proves the market cannot regulate of climate change directly, even if those in everything, or even anything. However, the question are German. newly established coal commission is tasked

CURTAILING THE SCOPE: FOSSILS FUELS AS ‘BRIDGE TECHNOLOGIES,’ AND THE ATTACK ON COMMUNITY ENERGY Driven by high electricity prices and of all, the Act introduced a new rule that also probably also influenced by the coal lobby, obliged small-scale producers, such as en- the German Renewable Energy Sources Act ergy cooperatives, to directly market their was revised in 2014 and 2016/17, with the ef- electricity, which many producers feared to fect of limiting the continued development be too complicated for them administrative- of renewables. The critics’ main argument ly, since they were usually managed by hon- was that the new targets for the development orary boards. Secondly, a bidding procedure of renewables’ share in the German electric- was established for new renewable energy ity mix (capped expansion to a maximum of projects that favored large-scale producers 45% in 2025 and a maximum of 55% in 2035) and put too much bureaucratic burden on would not be sufficient to cover the electrici- small-scale producers. Overall, the uncer- ty need upon completing the nuclear phase- tainty caused by the capped renewable ex- out. Critics also feared that this decision pansion plans, the direct marketing obliga- would automatically lead to an increase in tion and the new bidding procedure led to the share of climate-hostile coal-fired energy decreased investments by cooperatives. It generation, branded as a ‘bridge technology,’ became obvious that the German govern- in order to substitute nuclear power. Addi- ment was willing to abandon its own climate tionally, the 2014 version of the Renewable protection plans. Apart from some positive Energy Sources Act strongly disfavors the de- effects, for example, for community energy velopment of community energy companies, projects, the latest revision of the Renewable thereby taking a direct shot at the heart of Energy Sources Act of 2017 was, essentially, Energiewende’s original success story. First unable to achieve a change of direction.

All that glitters is not green: debates surrounding energy transition, by Bruno Fornillo and Nadja Charaby PUNTO DE DEBATE

11 Photo by Andreas Gücklhorn on Unsplash. Offingen, Alemania.

ENERGY JUSTICE THROUGHOUT THE VALUE CHAIN: RENEWABLES ARE INCREASING GLOBAL MINING ACTIVITIES

When discussing energy tran- in the global mining sector. Most of sition as a potential savior in our these resources are extracted in coun- climate or environmental dilemma, tries with problematic human rights there is still one other elephant in records or even in regions with ongo- the room: the resources used for pro- ing wars or armed conflicts. German ducing the renewable technology. A suppliers of renewable electricity, recent study by Misereor has shown usually companies with a strong com- that the resources needed for wind mitment to environmental standards mills and solar panels, such as baux- and sustainability, have not paid ite, copper ore, iron ore or silica sand, enough attention so far to the prob- are also leading to increased growth lematic origins of their technologies.

Rosa Luxemburg Stiftung Photo by Jeswin Thomas from Pexels

SYSTEM CHANGE IS NEEDED – INCLUDING IN THE (RENEWABLE) ENERGY SECTOR

If we want to save our planet and cre- to be regarded as a public good. It needs to ate justice on it, burning fossils fuels is not be democratically managed, to provide de- an option. However, a lot remains to be done cent work and to be held to environmental, in order to turn the energy transition into social and human rights standards from the a successful project that subscribes to the stage of resource extraction up to the mo- principles of climate, environmental and so- ment of energy supply. The mere availability cial justice. Accordingly, it is the task of pro- of affordable and efficient technology that gressive institutions such as the Rosa Lux- can compete financially with other technol- emburg Foundation to work together with ogies will not help to save the planet. What partners and projects that are strongly com- is needed is a fundamental system change mitted to a democratized, non-commodified – including in the energy sector. energy sector. We conclude that energy has By Nadja Charaby

*Bruno Fornillo is a Researcher for the Research Group on Geopolitics and The Commons (IEALC-UBA-CONICET)

**Nadja Charaby is Senior Advisor on Global Issues and Special Funds, RLF-Berlin

PUNTO DE DEBATE human rights and those of nature from a Director: Gerhard Dilger perspective of transformation, social justice Editorial coordination, Buenos Aires Office: Rosa Luxemburg Stiftung and environmental justice. Elisangela Soldatelli and Diego di Risio Nº 18, July 2018 Responsibility for the content provided in the Graphic design: Francisco Farina ISSN 2447-3553 articles lies entirely with the authors and does Proofreading and translation: Karen Tigar not necessarily reflect the opinion of the RLF. Circulation of 100 copies This edition is under the Creative Commons Santos Dumont 3721, CP 1427, Buenos Aires Punto de Debate is a publication edited by license 3.0-BY-NC-ND (Attribution – Non- rosaluxspba.org the Rosa Luxemburg Foundation, financed commerical use – No Derivative Works.) by the German Federal Ministry for Economic Cooperation and Development (BMZ). It seeks to open up spaces for debate surrounding one of the key areas of our political vision: Buen Vivir in Brazil and the Southern Cone;