Galvin Electricity Initiative: Competition Key to Energy and Environmental Goals
Restructured markets are key to achieving America’s climate change and carbon reduction goals and treat consumers “as partners, not prisoners,” according to an op-ed by John Kelly, Deputy Director of the Galvin Electricity Initiative in The Energy Daily.
Kelly’s claim is backed by positive results in several U.S. states and Great Britain, all of whom restructured their markets starting in the 1990’s. The states, all part of organized markets, have achieved success by learning from California’s 2000 energy market crisis:
“Recognizing the flaws in California’s approach, these states implemented a bilateral restructuring model whereby the bulk of electricity is traded in direct contracts between generators and large distribution companies or customers. Hourly pricing markets in these regions provide a means for setting competitive market prices. These new markets also provide ancillary service payments to consumers for providing demand response, day-ahead and other market services. In these new pricing markets, entrepreneurs and consumers are working together to lower demand when prices rise.”
Competition has created environmental benefits on both sides of the Atlantic. Great Britain reduced greenhouse gas emissions 20 percent between 1990 and 2007 when customers and businesses were empowered to choose their power from cleaner and more efficient sources, and utilities were motivated to improve efficiency and lower costs. Here in the U.S., the unique characteristics of organized competitive electricity markets enable clean energy generation to thrive:
“In restructured states, as coal-fired generation costs increase due to carbon costs, cleaner, more efficient generation (e.g., wind and natural gas) pushes the higher-cost coal generation out of the market. Unfortunately, older, inefficient coal and gas plants in structured markets are deemed stranded assets. As carbon costs rise, vertically integrated utilities can pass carbon costs on to consumers as the least cost option.”
Kelly’s op-ed once again demonstrates that well-structured markets perform well, and create economic and environment benefits for consumers. Competition’s market-based approach is fostering innovation, clean energy solutions, green jobs and affordable energy.
Joel Malina | July 9, 2010
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