The Effects of Deregulating Energy Markets

A friend just wrote:  The analogy with telephony just hit me yesterday, and I found this article today.

I respond: Hi, Tom.  I’m a little concerned about this article, to be honest.

• First, I’m not sure what the guy’s point is. That deregulation will bring down the cost of electricity?  I hope not, since it isn’t true.    That it will open up opportunities for new players to enter the market?  Yes, it does do that.

• He doesn’t seem to be aware that 17 states already have deregulated electricity.

• He’s wrong that grid-scale renewable is less expensive than the traditional competitors. The costs are coming down, and there are a few isolated cases where this is the case, in the center of the country where the supply typically exceeds the demand, but the levelized cost of energy for renewables is generally significantly higher than coal and natural gas. Also, the intermittent nature of solar and wind creates a challenge to high penetration rates.  It’s not insurmountable, but it’s most certainly there.  It will eventually happen through cheaper energy storage and better power transmission, and it will be accelerated greatly if we can internalize the externalities of burning fossil fuels.

Hope that helps.