Solar Tribune

Climate Change Policy: Adjusting Energy Markets

For the first century or so of the utility industry’s life, things were slow to change and the status quo helped to prop up the prosperity of the business. Each home would have a single utility option available to them in a regulated market, and the relationship between utility and customer was basic: the utility deliveries power and fixes the occasional outage, while the customer pays their bill once per month. In recent decades, though, policy and regulations have been pushing back that perhaps the status quo model of the energy market is not the most efficient on the basis of costs to the customer, growth of new technology, and the implementation of climate-focused signals. As such, certain policies targeting these long-standing energy markets have taken center stage.

Examples of some of these adjustments to energy markets that are in various stages of implementation already include the following:

 

Competitive Energy Markets

adjust energy markets climate change policy

What is it: While most utilities operate with a regulated monopoly over their customers, increasing amounts of states and countries have deregulated their energy markets to allow for competition among multiple energy providers. Such monopolies mean there’s less incentive for utilities to innovate and adapt to customers’ desires, but over a dozen states have passed legislation allowing competition in their energy markets which lets customers choose among multiple energy suppliers who will provide their generation (transmission and distribution are still covered by the local utility so as not to build out multiple grid systems). Because more customers these days want to know their home is being powered by renewable energy, implementing competitive energy markets is a policy mechanism to incentivize utilities to adapt to these new customer requirements.

Is it enacted anywhere: According to Electric Choice, 17 states plus Washington DC offer deregulated electricity markets.

In Favor of Competitive Energy Markets:

“In states that are highly regulated, such choice is not possible. Utilities might use some renewable resources to generate their electricity, but customers do not often have the same option to choose 100 percent renewables. Utility companies could offer this, but they don’t have competition to incentivize them to come up with such innovative programs or to reduce the prices of their renewable energy offers.

Laws and regulatory directives could be introduced that require them to take these steps, but these routes are often less efficient than letting the market work.”- Emily Folk, Renewable Energy Magazine

Against Competitive Energy Markets:

“The competitive market for energy is simply not working for residential customers. Consumers pay more for the same electricity, and even states with strong consumer protections have not ended overcharging and abusive marketing practices. In light of this history, states should consider whether competitive suppliers should be limited to the commercial and industrial markets and municipal aggregation.”- Jenifer Bosco, National Consumer Law Center

Read more:

Energy Deregulation Around the World: A Comprehensive Guide – Electric Choice

Energy Deregulation Opening Up Potential for Renewable Energy Future – Renewable Energy Magazine

Will Renewable Power Prosper in a Deregulated Industry? – Southwest Research and Information Center

 

Net Metering

net metering climate change policy

What is it: Net metering, often a lightning rod for debate in the energy communities, is defined as a billing arrangement that compensates on-site producers of energy (such as customers with rooftop solar systems) for any excess generation that they do not use and instead export to the utility grid, though the level and format of the compensation vary by location.

Is it enacted anywhere: According to the National Conference of State Legislatures, at least 17 states have authorized the use of net metering.

In Favor of Net Metering:

“Customers with rooftop solar systems are not only paying their fair share, they’re actually helping to reduce costs for their neighbors as well. Specifically, the benefits of solar DG exceed the retail cost of electricity and the value of solar is greater than the compensation solar DG customers receive under net metering programs.”- Commissioner of Michigan Dan Scripps

Against Net Metering:

“The private solar lobbyists in Lansing are pushing for a system that allows private homeowners to put a Cadillac-style energy system on their rooftops and pass the bill for maintaining the roads on to the rest of us.”- Bishop W.L. Starghill Jr, Michigan Democratic Black Caucus

Read more:

State Net Metering Policies – National Conference of State Legislatures

Net Metering – Solar Energy Industries Association

Net Metering: State, Local, & Tribal Governments – National Renewable Energy Laboratory

 

Decentralization of Energy Production

decentralized energy generation climate change

What is it: When energy production and the utility sector were set up and evolved over 100 years ago, the process that made the most sense in terms of efficiency and regulation was to have large-scale power generation take place in a central location (which could be controlled and regulated by a less local government agency) that would then disperse that energy over a large footprint to many different customers. In today’s world, though, power can be generated and is already generated on a smaller scale all over the grid, whether that’s a modest-sized wind farm, solar panels on a building rooftop, or otherwise. As the markets shift towards this more decentralized generation, policies encouraging this would look to give more control over local jurisdictions to make decisions over what power is going into the grid, where it’s coming from, and what’s the best decision for each smaller population.

Is it enacted anywhere: Everywhere that rooftop solar, small-scale wind, or any power generation not associated with a utility-scale power plant is already undergoing some form of energy decentralization. 

In Favor of Decentralization of Energy Production:

“Decentralized and small-scale, locally-governed energy systems make more sense than corporate-controlled energy grids, the governance of which no community has any say in. If we’ve got local communities that, instead of subsidizing fossil fuels or wind or solar, can spend their money on local production, small-scale, small-impact production of energy, then that would be preferable. It may not be perfect, but it’s a better answer than people in board rooms hundreds of miles away making decisions about what’s going to happen in my backyard or your backyard.” – Ben Price, Community Environmental Legal Defense Fund

Against Decentralization of Energy Production:

“Switching to a renewable or limited energy source may also have repercussions for security, scalability, and storage. If the power fails, you need to have enough energy stored away to continue operations when relying on renewable sources. You also need to be sure the grid or local supply you’re tapped into can handle the growth of your organization or operations. This can lead to more red tape during normal operations and expansion that you wouldn’t otherwise have with traditional energy channels.” – Thomas Industrial Insights

Read more:

Five Reasons to Switch to Decentralised Electricity Generation – The Governance Post

Decentralized energy production and community sustainability – International Public Policy Association

Experimenting with decentralized energy governance in China: The Case of New Energy Demonstration City Program

 

This page is a part of the Solar Tribune Series on how individuals and policymakers can tackle climate change. Click here to see the overview of this series and see the other categories of action.

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