Managed scarcity

The pandemic made time go a little funny. It sometimes feels like things that happened in 2019 happened more than a decade ago, life events feel like they happened to another person altogether. The shock of realization that it has only been 4 years since we were looking down the barrel of our first COVID summer never wears off. Throughout my summer travels I have seen precious few masks. Being aware of several travelers who recently returned home with COVID, a souvenir of a time as well as a place, I've been glad of my stash of N95s, tucked mostly forgotten in a suitcase pocket until I hear a cough or a sneeze in a crowd of people.

We have undertaken a collective forgetting. This selective amnesia often reminds me of The Guilty Remnant, a white-clad cult who haunts the protagonists in my favorite HBO series, The Leftovers. A show that takes place two years after a sudden, shocking, global event without explanation, it really hits differently after COVID.

A "lightly regulated monopoly"

These musings are inspired by a recent episode of Fresh Air featuring New Yor Times journalist and author Peter Goodman, who is promoting his new book about the pandemic supply chain breakdown, How the World Ran Out of Everything. The story he tells not only resonates with the clean energy industry for its direct impacts, but the macro themes themselves bear a distinct resemblance to the current state of affairs in U.S. energy markets.

1. Deregulation and financialization - the neoliberal philosophy that took hold in the 1970s and gained serious momentum in the 1980s prized efficiency gains above all else. U.S. productivity skyrocketed and manufacturing was sent overseas, chasing lower wages and weaker environmental protections. Unions in the U.S. took a huge hit around this time, losing their grip on the lifeblood of American industry. Shareholders demanded dividends and executives delivered, with a growing emphasis on quarterly earnings above stakeholder needs or corporate resilience. Around the same time, investment by U.S. electric utilities began a steady decline, with average investment dropping steadily since 1975. According to the U.S. Department of Energy, 70% of U.S. electricity transmission lines are more than 25 years old and approaching the end of their lifespan. Meanwhile, electric utilities as a category deliver the second-best dividend yield to investors, behind only financial services.
2. Consumer benefits - Consumers found a lot of things to like about these new trends. Consumer goods became cheaper, thanks to the advent of "just in time" supply chains, shipping containers, and cheap overseas production costs. Electricity consumers have likewise enjoyed very stable electricity rates until quite recently, with average inflation-adjusted retail rates hardly fluctuating since the 1970s. What wasn't being priced into electricity rates during this time? Ongoing investment in transmission infrastructure, and the cost of the damage that carbon and other combustion-related pollution has wrought. Oil executives knew, and they looked the other way.
3. The power of complexity - Goodman describes the global shipping system as a "lightly regulated monopoly" and I almost choked on my coffee with laughter. Talk about parallels to electricity! Taken out of context, one would be hard-pressed to distinguish whether he was talking about supply chains or energy with his closing thought on the surprising persistence of this terribly-fragile system:

"There's no question that people running our publicly traded companies have done a very good job funneling most of the gains to themselves and to the investor class and then using their wealth to amass political power that they've used to tilt the conditions further in their favor. And that does make all of our systems very difficult to reform. I mean, in case of the supply chain, you got to remember, this is not some system that, like, a bunch of wizards, you know, contemplated while they were sitting on top of a mountain, thinking about the most efficient way to move things around. This is a series of systems that have built up in a very ad hoc, improvised fashion with a lot of kind of cultish reverence for deregulation along the way. So it's so complicated that it's somewhat similar to finance after the great financial crisis. The complexities are so great that even the insiders don't really know where all the risks are, and you combine that with the point you're making about campaign finance, and inequality, and there is a powerful reinforcement of the status quo time and again."

There's been a lot of discussion in energy-wonk circles lately over whether deregulated electricity markets can deliver a decarbonized energy system. I don't pretend to have the answers, but it seems to me that a market-signal approach is missing the most important signal of all: a price on carbon.

I've been asking myself lately: what is power in the 21st century? Is it more about control of the creature comforts of a wealthy global middle class than it is about traditional geopolitical considerations? Consider the degree of visceral discontent we are seeing from the American middle class about their sudden change in fortunes. The promise of ever increasing wealth feels as though it evaporated overnight to many. A society that had come to expect $10 Uber rides, dollar-menu burgers, a daily Starbucks habit, and a 3,000 square foot home in the suburbs is contending with a future that feels increasingly unaffordable and unattainable. English muffins are $6.49 at the grocery store and it's a goddamn outrage.

If China manufactures 70% of the world's air conditioners, what does that mean in a future filled with even more of these deadly heatwaves?