The social, environmental and trade union case for public and democratic ownership of energy

1. The social, environmental and trade union case for public and democraticownership of energy By David Hall d.j.hall@gre.ac.uk Public Services International Research Unit (PSIRU) University of Greenwich, UK October 2012 www.psiru.org

2. Summary • Why public? • Problems with private power • German remunicipalisations • Developing countries • Why the public sector works • Why democratic? • Dimensions of democratic control • Draws on various PSIRU reports including: • Overview of energy in Africa October 2012 (working paper) • Remunicipalising public services in Europe May 2012 • Why we need public spending October 2010 • Global experience with electricity liberalisation December 2009; • Electricity companies in Latin America 2007 October 2007

3. Why public? • Failure of private sector • Positive case for public sector • Economic not just politics • Public is more economically efficient • Public sector is vehicle of infrastructure investment • Public sector is vehicle of investment in renewables • Public sector grows in line with economic growth

4. Privatisation & liberalisation: no price cuts, no investment • Prices: no benefits to consumers • EU: “public ownership tends to decrease prices [and] vertical disintegration tends to increase prices” • USA: prices rise fastest where deregulated • Connections: private sector does not invest • 90% of investment in electricity in Africa is state • Investment in extension of household connections are all state: e.g. rural electrification in South Africa, ‘luz para todos’ in Brazil • Power generation: underinvestment, corruption • independent power producers (IPPs) rely on government guarantees via power purchase agreements (PPAs) • corrupt, expensive, inflexible, anti-competitive • almost all investment is in gas, not renewables • R&D funding mainly public • Blackouts: Auckland, Rio, Buenos Aires, California, N-E USA/Canada, Italy, India

5. Problems with liberalisation in OECD countries “the structure of today’s ‘organized markets’ is neither competitive nor sustainable” (Andersen 2009)

6. A British business success……. Sales £m. (£422m. In 2009) Return on capital employed (42% in 2009) Aggreko (international power projects)

7. …. but a measure of global failure? • Aggreko rent temporary diesel generators - expensive, high carbon, does not develop local capacity • Market is result of failure to invest in developing countries • “Poor countries are seeing demand for power increasing by over 8% per annum……” but investment will prioritise replacing capacity in north. So: • “…. the world-wide shortfall of power generating capacity nearly 10-fold, from about 70 gigawatts (GW) in 2005 to around 600 gigawatts by 2015”

8. Public efficiency • Public finance works • Historically used in north (inc USA) and south • Tax revenue is sustainable basis • lower interest rates on debt than private corporations • crisis reinforces relative cheapness of public finance • even in developing countries! • E.g. Indonesia 2009 private pays 3% more for debt • Public/private operating efficiency: no difference • UK privatisations, global electricity comparisons, World Bank studies, electricity, water, transport etc • USA study finds unbundled systems are less efficient: deregulated states “have lower productive efficiency, and … decreases in efficiency over time. In particular, the vertical separation of generation… is associated with an adverse impact on productive efficiency” (Goto and Makhija 2009)

9. Renewables investment: government not market • Historical investment in renewables is by governments • Consensus that liberalised markets cannot deliver in EU “Several countries already source over 70% of their power generation from low-carbon sources (Figure B4.10)9. For these, investment has typically only occurred with substantial government intervention, even where markets have subsequently been liberalised” “we should not accept the significant risks and costs associated with the current market arrangements… changes to the current arrangements are both required and inevitable.” (UK Committee on Climate Change, 2009 http://www.theccc.org.uk/reports/progress-reports )

10. Re-municipalisation in Germany and elsewhere • German re-municipalisations driven by superior performance of public sector in delivering renewables • Municipalities buy energy companies from MNCs (> €8.1 billion) • Sales due to debts, concessions expire • New law facilitates municipalisation • Munich spells out reasons • Private sector has failed to deliver on renewables • Municipality can and will deliver on renewables • Elsewhere: • Latin America: renationalisation eg Bolivia, Argentina • Japan: state nationalises Tepco • Boulder City, Colorado, USA: a new municipal utility

11. Higher GDP, higher public spending Higher GDP per capita positively linked to higher public spending as % of GDP (OECD 2008) Long rise of public spending as % of GDP, in line with GDP per capita: “Wagners Law” (Tanzi 2000)

12. Even in the USA……1903-2010

13. Public solutions along the energy chain

14. Democratic • Democratic: political power and material interests 1. Democratic = not corporate • People 7 billion votes, corporations 0 • Against corporate power, corruption, campaign finance • decisions in public sphere, not secret meetings 2. Democratic = national not international institutions • Environmental and social priorities vs trade, profit • World Bank, IMF etc: no privatisation conditionalities • WTO, BITs: no compensation rights in breach of social/env rules • EU: environmental/social should override market

15. Democratic 3. Public ownership and control of natural resources • Oil-gas-coal, sunshine, wind and rivers • “Earth, fire, air and water” 4. Make private ownership of electricity/energy illegal • As with water in Netherlands, Uruguay, ?Italy • As per Indonesian constitution, Icelandic constitutions 5. Human right to energy • “Right to energy is human right, not corporate right” • Rural unconnected: right to energy from sun/wind/rivers • Human right as equality demand: energy for 1= energy for all

16. Democratic 6. Democratic = determined by public objectives • not commercial objectives • Long-term vision for planet and people • Development for planet: climate change • Social development for people • Economic development for countries (tech transfer etc) • Re-development for rich countries: with lower consumption? (air-con, cars, aluminium) 7. Unions and social movements for people vs capital • Based on material interests: workers, consumers, gender, neighbourhoods, rural • Also environmentalists and faith groups

17. Framework • Reducing GHGs as common public objective • Democratic and public as core framework • Political strategy is local issue • Technology is local issue • Energy source is local issue • Central/decentral is local issue • Pricing is local (public) issue • Just transition of employment is local issue

18. Conclusions • Role of public ownership based on core advantages • Public policy objectives central • Public ownership of resources • Renewables and low-carbon economy, universal affordable coverage • Flexibility over whole system: renewables, transport, demand • Decent jobs, not return on capital • Democratic accountability • Public finance is cheaper • Interest rates lower • Borrowing is just deferred taxation • Capacity-building and labour • Build competences, train labour at all levels

19. Can we do this? • Yes: we did it before, 1900-1950 • First electricity private • Multinational expansion with limited supply (for rich, lighting, tramways) • Public ownership by • Municipalisation • Nationalisation • Yes: we have done it in water • Water privatisation largely defeated since 2000 • Even reversal in home country of MNCs (France) • Still struggles but we won, not them

20. Anti-privatization struggles,