As the November election draws near, the economy is top of mind. And reliable energy that’s cleaner while affordable is paramount for voters across the aisle. But how do we get there?
As we look to the election and the year ahead, we’re tracking the energy questions at the top of voters’ minds – as well as key unfolding competitive energy policy issues.
Last week, we explored voter opinion polling showing a clear preference for affordable, reliable energy solutions and cost-effective approaches to reduce emissions. As candidates lay out their platforms in debates and on the campaign trail, they’re seeking options that keep our economy moving forward. A competitive market-based approach is the bipartisan path to achieve those goals.
Today, many parts of the United States have access to competitive wholesale electricity markets, run by independent grid operators, where power generation is bought and sold to meet reliability needs at the least cost. This stands in contrast to an approach that gives monopoly control over a service territory to a utility or power provider.
Competition among power providers enables winning solutions – for consumers, the grid and the environment. By ensuring that power markets send the right signals and avoiding policies that reduce competition or distort the market, policymakers can encourage transparent, cost-effective ways to meet energy goals.
4 Ways Competition Can Grow Our Economy & Reduce Emissions
- Encouraging Lower Costs
Competition among power generators puts downward pressure on prices. Competing offers from different market participants provide options and potentially lower cost alternatives which help reveal the true cost of generation.
Additionally, markets allow for lower cost resources to come online. As resources become cheaper, markets integrate those resources and prices reflect the cost difference so that customers of all types benefit.
Competitive power suppliers are responsible for the cost of their investments, providing more incentive to keep costs low and respond to customer needs. In many states, utilities can by law be guaranteed profits in the range of 10% or more on their assets and investments – including construction costs. That means customers end up paying for plants even if they are overbudget, overdue, or are never even used to generate power.
Compared to a constrained utility service area, regional planning in ISOs/RTOs also drives down costs to consumers by allowing for resource pooling and efficiency – as well as driving associated emissions savings across a wider geographic footprint. PJM Interconnection, which operates a competitive market serving 65 million customers in 13 states and the District of Columbia, has saved consumers $3.2-4 billion annually. In recent years, wholesale power prices across the nation’s competitive electricity markets have reached historic lows.
- Driving Innovation
By following market signals, EPSA members have been able to adapt and adopt new technologies, investing in cleaner energy like wind, solar and battery storage in addition to highly efficient natural gas generation. Today competitive power suppliers own some of the largest battery storage projects in the world and are investing in and building least cost renewable resources and emerging technologies.
Today’s competitive markets have seen significant investment in and deployment of new technology. The New York ISO reports the number of projects expected to enter its markets has tripled, with wind, solar and storage resources making up the majority in the queue. In PJM, roughly 88% of new megawatts in line represent renewable resources. And in New England, more than 6,800 MW of generating capacity (primarily coal, oil and nuclear) have retired or planned to retire since 2013, opening the door to new resources.
- Reducing Emissions
Since 2005, carbon dioxide emissions in the PJM footprint have decreased by 34%, thanks to new investments like those listed above, as well as planning and operational efficiencies. New York has seen a 55% drop in carbon emissions since the inception of competitive markets 20 years ago. And in areas served by New England’s competitive market, carbon emissions are down 36% since 2001, with coal use dropping from 15% in 2000 to just 0.4% in 2019 as part of a shift toward lower-emitting resources.
Spurred by the low cost of natural gas in the past decade, competitive suppliers in markets across the country have retired thousands of megawatts of coal because it was the economic choice – reducing both emissions and wholesale power prices. Power markets have to date not been designed to encourage emissions reductions; future changes could facilitate greater decarbonization.
- Helping Ensure Reliable Power
Our nation relies on an uninterrupted supply of electricity to power our homes, businesses, hospitals and emergency services. Competitive power suppliers in EPSA’s membership help meet that essential need by providing more than 152,000 MW of generation capacity to America’s power grid.
Today’s competitive electricity markets are designed to help ensure there is enough generation capacity available to meet demand at all times and in all conditions – at the least cost to consumers. To achieve that goal, some grid operators operate a capacity market, which secures commitments from generators to supply power when needed to meet future demand.
As the grid evolves, planning and market design must account for reliability needs, helping ensure we have enough of the right resources available to keep the lights on.
So, which policies spur competition, and which take us backward?
In part three of this series, we’ll share the key competitive energy issues we’re watching this election season.
