We at EPSA couldn’t have been happier when President Biden issued an Executive Order last week seeking to spur competition. While the Order does not specifically address power and generation resources, its goals of preserving competition between industry players to spur innovation, meeting customer desires, and reducing consumer costs resonate with EPSA’s Competitive Power Principles.
When announcing the Executive Order, Biden described how competition is foundational to the American economy:
“The heart of American capitalism is a simple idea: open and fair competition — that means that if your companies want to win your business, they have to go out and they have to up their game; better prices and services; new ideas and products.
That competition keeps the economy moving and keeps it growing. Fair competition is why capitalism has been the world’s greatest force for prosperity and growth…
But let me be very clear: Capitalism without competition is not capitalism; it is exploitation. Without healthy competition, big players can change and charge whatever they want and treat you however they want. And for too many Americans, that means accepting a bad deal for things that cannot go — you cannot go without.”
EPSA and our members vigorously support these pro-competition goals.
Why does EPSA support market-based policies? Find out here.
In tandem with this goal of more competition, the Biden-Harris Administration also has established ambitious emissions reduction goals as it seeks to decarbonize the economy. While we have concerns about the impact on reliability of an overly aggressive timetable, EPSA and our members fully support the Administration’s pro-market message. Requiring competition and putting market participants front and center will ensure consumer costs are kept as low as possible while we work to solve the climate crisis, one of the most daunting challenges we have ever faced.
All credible studies agree that a successful transition to a lower emission future will be costly. Knowing this, why wouldn’t policymakers use every tool available to minimize costs while working to deliver the desired outcome? It seems clear that unleashing the power of competition and market-driven investment will shift risk to those best able to bear it while delivering meaningful results to those who will derive the highest benefit.
Private investment spurred by competition can deliver several important advantages. First, companies must be prudent about the projects they choose to invest in. By shifting the risk of investments away from customers and onto investors and shareholders, private investment ensures spending discipline. Investing without a safety net results in more disciplined capital deployment because there are no captive customers to finance and support economically unsuccessful projects.
Second, competition sparks efficiency across the market. To successfully meet aggressive climate goals, companies will need to sharpen their pencils and provide the best possible product at lowest cost, rather than rely on a safety net to protect against delays and cost overruns. Any failure to perform to standard will – and should – result in market penalties to the party that failed to deliver.
In sum, incentivizing market participants to pursue and achieve through market dynamics leads to better outcomes.
More than 20 years of empirical data shows that restructured markets have forced more disciplined investments in generation technology, resulting in lower emissions at a lower cost to consumers. These tremendous economic and environmental achievements demonstrate the benefits of a market-based system. If the Administration is looking to incentivize cost-effective, innovative solutions, President Biden should look to the successes of the power sector, where the investments to be made are significant, the savings could be dramatic, and the outcomes – both environmental and economic – could deliver huge wins for America.
Learn more about the benefits of competition – for consumers, the grid and the environment.
