Deregulation of energy markets has a mixed record on promoting renewables.
By Clint Robertson
When states started deregulating their energy markets more than a decade ago, competition was introduced in hopes of driving down market prices for electricity and giving the consumer the power to shop for energy.
But perhaps the most notable opportunity in deregulation is the consumer’s ability to go green. Many retail suppliers offer green energy plans, which allow customers to purchase renewable energy, generated from infinite resources, such as the sun or wind.
While deregulation can give consumers more control over their own carbon footprint, how are deregulated states fairing in the race to go green? Has the policy paved the way for renewable expansions? Are they in fact greener than their regulated counterparts?
Renewable Energy In The United States
With so many eco-savvy consumers, it's no secret that the country is trying to become a greener place. Despite the fact that there's no national mandate for renewable energy use, 30 states and the District of Columbia have voluntarily implemented renewable portfolio standards (RPS) to increase electricity production from environmentally friendly resources. Because these states have a mix of deregulated and regulated energy markets it’s tough to say whether either market is greener.
Take Texas for example.
Its renewable portfolio standard was part of the same legislation that deregulated its energy market. In total, the RPS calls for the state to produce 10,000 MW of electricity by 2025. Since deregulation and the RPS were implemented in 2002, renewable energy production has risen from 1 percent to 7 percent in the state. But the jump should come as no surprise since Texas surpassed its RPS goals by 2010, reaching the 10,000 MW mark 15 years early.
In 2010, the U.S. Energy Information Administration also named the state number five in the nation for renewable energy generation.
No Correlation Between Deregulation And Renewable Energy
But Texas’ strides to go green seem to be canceled out by its carbon emissions. From 2000 to 2010, Texas led the nation in carbon dioxide emissions, producing 7.5 billion metric tons, according to the EIA. It emitted 75 percent more CO2 over the time period than the second highest carbon-emitting state, California, which suspended its deregulated energy market in 2001.
On the other end of the spectrum, Washington State, a non-deregulated market, generates more renewable resources than any other state. In total, Washington produced 74.9 gigawatt hours of clean energy in 2010, according to the EIA's most recent data. With such varying production across the United States, it seems that there isn't a correlation between renewable energy generation and the deregulation of energy markets.
Deregulation Leads To Grid Improvements
Though deregulation may not play a role in renewable energy production, many believe deregulation is paving the way for smart grid technology. And advancements in the power grid make it easier to get green energy from generation companies to the power grid and finally into people's homes.
According to a report by GridWise Alliance and the Smart Grid Policy Center, there is an obvious relationship between states with retail electric choice and investments in grid modernization. Out of the report’s top 15 states in smart grid deployment, 11 operate with a full or partly deregulated energy market. It also found that areas with electric choice implement smart meter programs and grid education programs, which help generate investments in modernization of the system.
The reason that deregulated areas have been more successful at grid modernization may be, at least in part, because of utilities. Many of the utilities in regulated areas generate their own electricity. If demand for their fossil fuel-powered energy decreases, they will lose revenue. It's important to note that this is not as much of an issue in deregulated areas where utilities are responsible solely for the delivery of electricity, not the generation or sale of the commodity.
Barriers to Solar Power
According to a report by the Edison Electric Institute, solar power is the largest threat to the current utility model. There were approximately 200,000 distributed solar customers in the United States in 2011, 70 percent of which were concentrated within 10 utilities service areas.
Though many regulated utilities have escaped the threat of incoming solar projects for now, the report assesses the risk for the current utility model should solar continue to grow within the nation. So it's not likely that utilities that generate electricity will make is easy for consumers to get green energy in regulated areas.
Regardless of whether a state has a deregulated energy market or not, it’s up to the utility to deliver electricity to people's homes. And without grid modernization there are plenty of barriers for renewable energy. First of all, renewable energy is often generated in remote locations that don't have access to transmission.
Additionally, there can be a lack of interconnection rules, which make it difficult — sometimes impossible — to connect renewable energy to the utility grid, according to the U.S. Environmental Protection Agency. And to top it all off, utility rate structures can increase the cost of green energy through added charges and fees.
Obviously there are things that hinder renewable energy from entering the power grid in every state. But it seems that more deregulated states have taken greater strides toward innovating for a secure energy future by advancing the grid technology that connects people with clean power.
About the Author:
Clint Robertson is a freelance writer who has held numerous positions in the energy industry. His work promotes ways to educate the general population and reduce the carbon footprint for the betterment of the world by focusing on our need for renewable energy sources.