Meeting The Challenges Ahead: Regional Electricity Markets Foster America’s Energy Independence And Security

Everyone agrees that the United States must reduce its dependence on foreign energy sources. The Energy Policy Act of 2005 reflects this basic sentiment, providing new or enhanced programs for alternative fuels, renewable energy, conservation, and efficiency. Furthermore, the policy signals emanating from both Congress, the White House, and at the state level since the November 2006 election have only served to reinforce these national priorities. Yet, policymakers have only just begun to recognize the key role that vibrant regional competitive markets can play in fostering energy independence and security.

As detailed in this issue brief, well-structured markets for electricity promote renewable generation, environmental improvement, energy efficiency, demand response, enhanced operational efficiency, and technological innovation. They enhance our ability to deliver more innovative energy services without increasing our dependence on foreign sources of energy and without doing further damage to our environment. Because competitive markets provide high-quality information -- embedded in price signals that reflect the forces of supply and demand -- and because they place a premium on the efficient utilization of resources, they incentivize key stakeholders to find new and better ways to meet the challenging energy demands of a dynamic and growing economy.

As we enter an era of rising energy prices, stemming from a global scramble for fossil hydrocarbons and increasing environmental constraints on fossil-based generation, we must recognize the value of markets in providing the proper signals that can shift resource allocation decisions toward a leaner, and less carbon-intensive energy system. Today, more than two-thirds of the nation’s electricity consumers live or do business in states that are part of regional competitive electricity markets. Simply put, markets provide the only viable approach to eliminating the barriers, spurring the innovation, and creating the necessary information flows that will allow electricity suppliers, transmission system operators, and millions of customers to collectively navigate the inevitable transition to a new energy era.

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