Competition for Cleaner Energy Will Pay Dividends for Climate and the Economy

Source: By Charles Hernick, Citizens for Responsible Energy Solutions (CRES) Forum • Posted: Thursday, September 2, 2021

America’s energy system has entered a new era where companies are competing against one another to reduce greenhouse gas emissions. Customers—large and small—are concerned about climate change, forcing business models to adapt beyond keeping the lights on.

Today, 75% of households in the U.S. are served by a utility with a carbon or emissions reduction goal—to be carbon-free or net-zero by 2050. This trajectory raises questions about how to keep energy costs low and assure reliable power. But at the end of the day, competitive pressures and the well-targeted infrastructure investment passed by the U.S. Senate and under consideration by the U.S. House of Representative should alleviate many concerns.

Over the past decade, due to falling costs, renewables have doubled and now make up 20% of generation. Natural gas has displaced coal one-to-one because of the shale revolution and economics. Combined, these two factors have driven down U.S. greenhouse gases and are the reason the U.S. leads the world in greenhouse gas emissions reductions.

We are now at a tipping point where clean energy—low- and zero-emissions generation—are the norm, not the alternative. At the same time, reliable electricity has never been more vital to the American economy. From charging phones and cars, to powering critical infrastructure like hospitals, emergency services, defense, and farms, electricity is simply something we cannot live without. That is why blackouts from extreme weather or failures of aged powerlines, transformers, and pipelines make compelling headlines.

Large-scale blackouts, whether in Texas or California, have no simple explanation—they are a complex combination of real-time information and decision-making errors combined with malfunctioning infrastructure. But they underscore the need for reliability in power markets while also managing critical goals such as mitigating carbon emissions and maintaining affordable electricity prices.

Diverse approaches and competition are delivering beneficial results. In some states, a single utility controls generation, transmission, and distribution. In other states, there are degrees of competition whereby independent power providers supply the power generation to homes and businesses. Some states and utilities participate in wholesale markets that cross state lines through regional transmission organizations (RTOs). Some states go further, giving electricity customers their choice of electric provider, known as customer or retail choice. Across the board, whether competing locally for household contracts like companies do in Texas, or making clean energy investments to lure tech-company data hubs to Georgia, the race is on to reduce emissions and assure reliability.

The bottom line is that competition has helped deliver these benefits to consumers. Across the country costs have stayed low and reliability overall has been maintained. In America’s largest regional wholesale power market, PJM, competition has helped save $3.2 billion to $4 billion in annual electricity costs. In competitive regions like the PJM, power generators will face a loss of business if they fail to operate in severe weather. This factor incentivizes power generators to maintain reliability during extreme weather. Customers win when companies compete.

Congress can help by passing the Infrastructure Investment and Jobs Act (IIJA). The bipartisan bill makes critical investments to upgrade transmission assets and improve the grid’s resiliency, flexibility, and cybersecurity; it supports investments to integrate renewables, improve grid reliability, and better mitigate the impact of extreme weather events and natural disasters; and it makes consequential reforms to permitting that will speed up large energy infrastructure projects. Having passed out of the Senate with nearly three quarters of Senators in favor, IIJA now faces a looming September 27 House vote.

The prospect of a once-in-a-generation infrastructure investment by Congress is encouraging. This targeted investment, alongside competitive pressures of market forces established in a large portion of America’s electricity grid, will help drive power providers to achieve their self-set goals. While diversity of technologies and business models doesn’t guarantee resilience, we should be encouraged by how far we’ve come in reducing emissions and keeping the lights on. More competition is a clear solution to achieve these goals.

Charles Hernick is a vice president at Citizens for Responsible Energy Solutions (CRES) Forum, a nonpartisan, 501 (c)(3) nonprofit organization committed to educating the public and influencing the national conversation about clean energy.