Screw company profits: This is Energy Capitalism

Screw company profits. This is capitalism! On the pages of the Wall Street Journal there were a couple recent articles demonstrating opposite business success stories. a) First mover advantage – is an advantage in energy technology; and b) first mover advantage – is not an advantage in energy technology. So what is the right answer? Well, since I’m by training a neo-Marxist economic-political Geographer, my perspective is slightly different than everyone else’s. But the verdict in an energy system, that relies heavily on a free market – and competition (no matter how distorted), then boom and bust for companies may actually be good for the Earth, society and the first movers who foresee the collapse. 

The argument can logically be made, that through effective and clear economic and energy policies, that a predictable investment environment should be established that fosters technological innovation. This perspective runs through much of my analysis of how to defuse climate change. However, in the harsh world of Capitalism, we know that firms will seek that first mover advantage and/or in the game for competition – and to win. Therefore, flattening out the peaks and troughs of government and industry price points, means lowering the incentive for some companies (think gas peaker plants, used only when electricity demand is super high and the temperature is 100 degrees). On the other hand, it would also mean less wasted resources in the tight world of energy R&D. Well, as a consumer, do I really care what company produces my solar panels? I want it cheap, just like my toys, computer and clothes. And that means – MADE IN CHINA. Or, efficiently produced in the US/EU (pick your developed country).

We can talk about technology bubbles and even oil and gas bubbles, but there are benefits for companies to race as a herd in one direction, with price being a central component to winning. As demonstrated by the company that produces highly efficient public LED street lighting – if you can tie together innovation and the price of your component, then there is a winning formula there. And as the WSJ article on the lack of a first mover advantage states, ” Rather, they will likely be companies with the scale to compete on price and absorb the inevitable cyclical losses that afflict most manufacturing industries prone to bouts of oversupply.” Thus innovate and get it right – when you and the industry are small… but be prepared to massively scale up and slash the cost quickly to survive over the long term – particularly when government subsidies are lowered. Now, that is Energy Capitalism for you.