Who Owns Power in the Energy Transition?

Governments globally have privatized and marketized the electricity sector as part of the larger economic trend toward neoliberalism over the past 50 years. Fully decarbonizing the electricity system will require large-scale, global transformation. Can the private sector– increasingly holding more of the system– drive this transformation while also providing affordable service and a just transition? We argue that it cannot. We propose that democratic, public ownership of the electricity grid can best deliver on energy affordability and a green transition. 

However renewable energy emerged during the turn toward privatization, meaning that deployment has largely been managed via private companies. In some places, renewables have entered an already-marketized system and projects are running up against the confines of the market system. In other cases, renewables have actually acted as a mechanism to undercut publicly held utilities or energy systems – through a range of different sorts of  “public-private” partnerships. These sorts of partnerships have come often at the cost of union labor and higher capital costs. We explore these dynamics through five case studies, focusing on examples where there either is, or previously was, a strong public sector utility. 

Uruguay: Uruguay made a rapid shift to 95 percent renewable power within a decade– successfully accomplishing an authentic energy revolution. The national public utility coordinated wind power installations and fossil fuel wind downs. While the public utility managed the transition, Uruguay chose to work with private developers to install the wind assets. Now private companies hold 81 percent of renewable capacity, extracting substantial rents from the assets that could have been held publicly. The Uruguayan transition shows that publicly-owned systems can deliver clean and affordable energy, but also why states should fully evaluate the long term effects of partnering with private firms in the transition. 

South Africa: South Africa’s national state-owned power utility, Eskom, has historically held control over power generation. After governmental neglect and various efforts to commercialize Eskom, the nation has turned to public-private partnerships and market deregulation to drive investment. Cobbled by new profit requirements and saddled with an aging coal fleet, privatization advocates were able to argue that Eskom is ill-equipped to green the electricity system. Thus, renewables have largely been brought into the country via a more liberalized market scheme, creating a deeply unequal, dysfunctional, and unjust energy system in the process. Advocates are now calling for a “Green New Eskom” to democratize the transition for workers and energy users alike.

United Kingdom: The UK started with a publicly run, vertically integrated energy system. However, by the early 2000’s, the UK had one of the most heavily marketized energy systems in the world. The market has failed to rapidly transition to renewables on the grid and the UK has had to use a heavy governmental hand in order to keep renewables interesting to the private sector. As the imperative to decarbonize and ensure resilience becomes more dire, advocates are demanding a shift back to a publicly owned, vertically integrated Great British Energy to help create the stability needed to ensure renewables deployment, even amongst ever-increasing turbulence.

United States: Nebraska stands out in the United States’ energy landscape as the only state with fully publicly-run poles and wires, managed by 166 localized public systems. Recent national energy trends have affected the structure of Nebraska utilities, turning them toward more public-private partnerships and corporatization. Federal structural incentives for renewables have heavily favored private ownership, which means that almost all of the renewable energy development in the state has been brokered via public-private partnerships– sometimes leading to negative community outcomes. The recent Inflation Reduction Act (IRA) opened up new possibilities for public ownership of renewables, the question will be if Nebraska takes up a more active role in building its own renewables instead of relying on the private sector.

France: The French are known for their public planning. The electric utility, Électricite de France (EDF), was a beacon of modernization and rebuilding in the postwar period, providing high quality jobs and low cost services. In the 1990’s, the context around EDF began to change. The EU progressively liberalized its electricity system, spinning out the different pieces of the sector into discrete markets and entities, increasing costs to consumers and making it more difficult to do long term planning. Now in the era of the green transition, France is experiencing the drawbacks of a market-based system to make the overhaul to a green transition. EDF could play a much stronger and beneficial role under a more holistic and democratic approach to energy planning overall.

While renewables may have emerged in an era of utility privatization and market liberalization, it does not mean that the necessary green transition will come to bear under such conditions. The trends we explored in the five case studies show that privatization has not brought a rapid, affordable, and equitable transition. In fact, while the state may have privatized power, it conversely also had to invest massive public dollars to incentivize private players to build renewables. 

We argue that public ownership over the power sector can be a critical ingredient to meeting the moment of decarbonization. This would provide the public with the opportunity for more coordinated planning across large geographies– providing opportunities for public input, high roads jobs, and effective land use management. It would also potentially lower the cost of the transition, eliminating the need for a complex web of sticks and carrots to move a heterogeneous group of private actors to move in a coordinated direction. Instead, the state could directly invest public money in a strategic electricity decarbonization plan. Ultimately, the renewable energy transition is an opportunity to remake the electricity sector so that it prioritizes green energy, affordability, and equity– and an empowered, democratic public system could deliver that future.