Dampening Competitive Electricity Markets in the Americas | News, Sports, Jobs

Sanders wants to subdue the market-based approach by launching the Green New Deal and spending $ 16.3 trillion. One of the goals is to put the federal government at the forefront of electricity generation, until private operators are ousted. Other activists prefer to make a thousand cuts to the market-based system and have done so for years.

An upheaval in the electricity markets would be particularly troublesome for energy-intensive industries like manufacturing – and tens of millions of consumers are literally struggling to keep the lights on.

Of course, the production and distribution of electricity requires regulation and has never been "Free market." Government programs, for example, were essential to get electricity to rural America.

Electricity is also a prerequisite for modern living. Without this, there are significant threats to human health and safety. There are also significant efficiency gains that come from the scale. All this augurs for a regulatory system to guarantee competitive prices and that the power supply almost always stays on. The system has worked well for decades.

Today, however, there is a growing gap between what electricity should cost and what it does. Natural gas, the benchmark fuel for determining electricity costs, has fallen by more than 50% in the past two years.

Still, the U.S. Energy Information Administration reports that consumers' electricity bills rose an average of 1.5% from December 2017 to December 2019.

State energy policies are a major culprit, particularly because an increasing number of elected officials want to determine the sources of energy for production. Techniques to boost renewable energy projects and bury costs include:

Improvements to the transportation network that will mainly benefit renewal projects without explicitly saying so.

Electricity purchase agreements with state entities that will provide higher than market prices for solar and wind power, often for years.

Opaque charges on electricity bills that will direct money to renewable energy programs.

One of the functions of a regulated electricity sector is to ensure that there will be enough electricity when demand is highest and emergencies arise. A system known as capacity markets overcomes this challenge.

With the capacity markets, producers supply electricity offers which they will deliver on a given date in the future. It is imperative that food is provided and provided consistently.

Wind and solar energy are intermittent sources. As such, they do not lend themselves well to being in the capacity markets as they cannot generate electricity 24/7. Still, many states have requested exemptions for these sources of energy to be included in capacity markets, which are regulated by the Federal Energy Regulatory Commission.

Capacity markets are also essential to the reliability of the network as they indicate where and when capital investments should be made. If these markets are corrupt, the very reliability of the power grid itself is at stake.

The FERC, which is legally empowered to guarantee the reliability of the electricity network, recently issued orders obliging New York and the 13 states of the PJM Interconnection transport network to take better account of the subsidies received by renewable energy sources. , as well as the intermittent nature of wind and solar.

On February 20, the FERC canceled New York's attempts to obtain exemptions for renewable energy sources, so that it could be significantly involved in the capacity markets.

All this augurs for greater clarity in the electricity markets.

Advocates of wind and solar power claim that the price of this energy has dropped dramatically, largely due to recent technological innovation. It is time for these sources of energy to enter the market without subsidies, which have been widespread for 10 years.

If they still cannot compete without subsidies, there is still a way to go for renewable energy. State governments, if they dare, could impose a carbon tax. This would be a solution to FERC decisions. It would also bring greater clarity to individuals and businesses on the costs of electricity.

While carbon taxes have been extremely unpopular politically, measures taken to incubate renewable energy have been costly and degraded in competitive markets.

It is time for state activists to realize their daring goals and live with the consequences, from top to bottom. After all, Bernie Sanders does it.

Paul Steidler is a senior researcher at the Lexington Institute, a public policy think tank based in Arlington, Virginia.

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