Where Does Competition Occur?

Consumers need access to new, transformative technologies to manage their energy use, and monopoly barriers don’t make that easy, Reid Detchon, executive director of the Energy Future Coalition lamented at a Brookings Institution forum last week on climate change and the smart grid.

“Where does competition occur?” Detchon asked, citing the “structural impediments” for monopoly regulated utilities to promote reduced energy use by their customers.  Once the market signals are right, consumers’ energy use will be mitigated by price, Detchon said.

“We do need more competition,” said David Owens, executive vice president of business operations at the Edison Electric Institute, the trade group representing investor-owned utilities.  Pilot programs by utilities have shown that consumers respond to price signals, Owens noted.  These pilot programs showed there was a “tremendous shift” in energy use by low-income customers motivated to save on their electricity bill, he said.

The most likely integration of smart grid’s innovative energy management technologies will occur through “greater reliance on markets,” said Peter Fox-Penner, principal and chairman emeritus of the Brattle Group.

Brattle has measured the benefits of the organized competitive wholesale markets and they are working “better and better and better,” Fox-Penner said.  Getting similar good results in retail competition is a more complicated proposition, he said.  The “most likely” enabler of the technology we will be the introduction of “more competition,” he said.

Smart grid is a platform and the key is how quickly we can adopt technology and innovation, said Patricia Hoffman, principal deputy assistant secretary in the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability. The innovation and transformative power of smart grid technologies and services will require the ability of customers to respond proactively in response to energy costs, Hoffman said, and right now most consumers can only respond retroactively to a monthly bill for electricity they’ve already consumed.

Well-functioning competitive markets at the wholesale and retail level have demonstrated the ability to deliver new technologies and innovation, and the COMPETE Coalition strongly supports them as a key enabler for consumers to realize the full value of smart grid investments. Joel Malina | April 13, 2010