Public-Private Partnerships Hurt the Clean Energy Transition

This summer is shattering world records for heat. The climate crisis is already here, and the need for a global shift away from fossil fuels is beyond urgent. The electric grid is a key factor in this shift: addressing the climate crisis means electrifying all our energy, then making sure that this energy is coming from renewable sources.

Unfortunately, the decarbonization of our electricity sector has been uneven. A February report from Rhodium Group pointed out that the US electricity sector is nowhere close to meeting its decarbonization targets as outlined in the Inflation Reduction Act. In New York, where I live, we are similarly off track to meet our renewable electricity goals, while Governor Kathy Hochul has mused in the press that the goals themselves may be unattainable.

One major problem that got us here is the reliance on the free market in attempts to deal with the climate crisis. When renewable electricity prices are consistently falling, competitive profits to investors fall. Many countries have attempted to reconcile this contradiction through public-private partnerships, such as agreements to publicly finance privately owned projects or purchasing agreements between public and private companies.

A new paper from the Climate and Community Project that I coauthored examines this vexed relationship between public goods and private markets, examining five case studies of public-private partnerships and deregulation in the electric grid. In case after case, we see how private ownership and financing runs the risk of concentrating gains in private hands while leaving the public responsible for liabilities — ultimately undermining the goal of a publicly owned renewable energy future.

…