Climate goals and renewable energy deployment require a competitive electricity market

As the United States joins the rest of the world in tackling climate change, it will become critical for power generators to continue to include renewable energy in their investment portfolios.This challenge It balances the variability introduced by solar and wind energy while minimizing carbon-intensive power generation. The monopoly of utility models was not established for this purpose.A competitive electricity market is the best way to integrate renewable energy-including Distributed generation— And to provide American customers with affordability and reliability.Fortunately, the Biden’s White House Executive Order of July 9 Recognize the broader principle of prioritizing competition and instruct government agencies to implement policies to ensure competition. The order stated, “For consumers, [competition] Means more choices, better services and lower prices. “

The reason should be obvious. Monopolies have no incentive to develop new technologies and cost-effective power generation infrastructure. On the contrary, monopoly utilities are mainly driven by the guaranteed rate of return on their existing investments. In the past, this model may have benefited Wall Street. It rarely creates the best results for customers or our climate change goals.

Recently, nine former Federal Energy Regulatory Commission (FERC) regulators sent a copy of letter FERC believes that competitive grid operators, namely regional transmission organizations (RTO) and independent system operators (ISO), are the best platform to develop renewable energy and ensure the best consumer benefits. Large-scale, organized wholesale markets allow economies of scale to send the right signals and provide the lowest-cost, customer-centric approach to low-carbon or zero-carbon grids.

Responding to climate change requires the large-scale operation of competitive markets. This is where RTO and ISO come in. Generally, RTO and ISO distribute energy in multiple states, allowing them to reduce emissions while integrating renewable resources with variable output, including solar and wind energy.In fact, the former member of the Federal Energy Regulatory Commission Quote “More than 80% of renewable energy power generation has been deployed in organized market areas where emissions are falling faster.” Competitive market models create incentives to adapt to technology trends and customer preferences, including more renewables energy.

result?Competitive market remuneration Innovation and deployment of new products.Taking into account the carbon emissions of PJM, one of the largest grid operators in the United States reduce Due to more efficient technology, there was an increase of 39% between 2005 and 2020.New York’s highly competitive market experienced As price signals encourage efficiency, carbon emissions have been reduced by 52% in the past 20 years.some Advocate of public utility monopoly Attempts to refute this argument with carefully selected data, claiming the opposite. However, unbiased data from PJM and NYISO provide accurate pictures.

The picture shows a wind power plant.
Jorge Guerrero/AFP via Getty Images

Monopoly models provide a different story, mainly because they are based on maximizing capital expenditures.As the Pacific Institute economist Wayne Winegarden (Wayne Winegarden) recently Explanation in Forbes, “Companies that operate on cost-plus business have no incentive to implement innovations to reduce customer costs or improve services—in fact, the easiest way to earn revenue is to operate under cost inflation and then apply it when unnecessary Cost structure with huge percentage profit margin.”

Examples of this are everywhere. In Mississippi, Southern Company conducted a multi-billion-dollar “clean coal” technology project in Kemper County. As a result, there was a major delay and the cost surged from $2.4 billion to $7.5 billion.According to reports, senior management knew about construction problems and design flaws years before the project collapsed. Present Show the public a beautiful picture of Kemper’s prospects.They even use political influence make sure Interest rate hike on construction costs by US$1 billion.Without the decisive action of state regulators, customers, rather than shareholders of Southern Company, could have hook More than 3 billion U.S. dollars.

Further east, a project that brought nuclear energy to South Carolina has a similar fate. This project is a joint venture between Southern Company and SCANA, should It cost about 14 billion U.S. dollars.However, due to delays caused by accounting errors and mismanagement, SCANA went bankrupt in 2017, even though SCANA misled the public allow It will sell more than $1 billion in bonds and boost the stock price.The last thing left to consumers is To pay US$9 billion was spent on unfinished projects. It is the customers who suffer losses, not their monopoly suppliers, because the risk is transferred from investors to the public who has no choice.

This is not to say that a competitive market ensures error-free power generation, distribution, and a cleaner environment. They can apply data technology on a large scale to improve the efficiency of electricity production while meeting consumers’ demand for more renewable energy. In this regard, we can learn from Europe by strengthening cooperation with the European Power System Operators Network (ENTSO-E). European operators have a wealth of experience in integrating renewable energy into the grid-we should learn from it.

We need to develop renewable energy to deal with climate change, and we need a competitive power model to achieve this goal. Now is the time to transition from an obstructive monopoly model to the adoption of competitive power markets, which are facing the future head-on with innovative and customer-centric solutions.

Richard D. Kauzlarich is a former US ambassador and co-director of the Center for Energy Science and Policy. He is also a distinguished visiting professor at the Schar School of Policy and Government at George Mason University.

The views expressed in this article are those of the author.

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