As the economic horizon darkens, Earth Week marks a moral imperative to unite consumer, taxpayer and environmental interests. The perceived economic threat of climate action forced President Joe Biden to mention climate once in his State of the Union address and recast his energy agenda to battle rising costs and inflation. The president could ameliorate climate’s economic stigma by applying his competition agenda to the notoriously monopolistic electric power industry. This aligns with recent congressional activity, which targets competitive reforms that resolve clean supply chain bottlenecks, lower energy costs and achieve greater emissions reductions than Build Back Better (BBB).
The clock is ticking. Public debt and greenhouse gases are accumulating at unprecedented levels. Competitive reforms address both problems but remain overshadowed by a misguided obsession with public spending. Notably, fiscal steward Sen. Joe Manchin (DW.Va.) cited inflation and debt as his main concerns in opposing BBB. Analyzes confirmed that most energy subsidies in BBB had costs exceeding benefits and harmed economic growth and inflation. Politically and economically, taxpayers cannot shoulder the energy transition — nor do we need them to.
Competitive markets are the unsung hero of the clean transition. The cost of capital has become a function of environmental concerns. Environmental investing grew 42 percent from 2018 to 2020 and now constitutes one-third of all domestic assets under management at over $ 17 trillion. Private capital will grow as an environmental force, irrespective of subsidies. But the transition cannot occur without unseating the existing assets of incumbent utilities, which have built a regulatory moat that impedes competition.
Inefficient regulation deters new entrants and results in a staggering backlog of clean energy development. Today’s electric grids are artificially congested because utilities shun lower-cost solutions, rather than embrace them like competitive enterprises do. Injecting competitive discipline into the operation of transmission assets can double renewable energy capacity, save consumers tens of billions on electric bills and achieve greater emissions cuts than BBB this decade.
Similarly, new investment in transmission lines remains controversial and expensive because monopoly utilities dominate 97 percent of new transmission builds. Implementing robust competitive solicitations nationwide would reduce transmission costs by 20-40 percent and just over $ 100 billion in long-term savings. Such outcomes are why competition is a bedrock of a just energy transition; it lowers regressive electric rates and boosts domestic industries.
While competition for transmission has been sparse, introducing widespread competition for power generation has been an undeniable success. Regions like the Mid-Atlantic that adopted competitive electricity markets have seen generation costs and emissions decline. Competition has bolstered grid reliability and innovation while reducing costs and emissions across every generation fuel class. Competition spurred efficiency in the nuclear and fossil fleet and especially lowers costs for wind, solar and batteries. Meanwhile, digital technologies enhance the prospect of letting customers choose their supplier, which is linked to lower costs and cleaner energy decisions at the discretion of customers, not monopolies.
Some regions failed to overcome the inertia of incumbent utilities, forcing customers to endure monopoly boondoggles. In South Carolina, customers are on the hook for billions for a plant that never reached completion but resulted in foul play that landed the utility CEO behind bars. In Georgia, the average household pays $ 850 for an unfinished plant that is an order of magnitude more expensive than competitive alternatives. Introducing competitive generation in the Southeast alone could create over $ 300 billion in economic savings with steep emissions cuts by 2040.
Electricity competition and choice is a conservative legacy, propelled first in Texas then nationally under former President George W. Bush. The lead energy regulators of the last two Republican administrations reiterated this conservative staple last week. Meanwhile, generation competition is resurgent in progressive ranks, spearheaded by a new bill introduced by Sen. Ed Markey (D-Mass.). Congress should also prioritize pleas from dozens of consumer groups to pass a competitive transmission law, including a letter to Sen. Manchin last week.
The competition chorus has members as diverse as NRDC, the Heritage Foundation, Earthjustice, the R Street Institute, Public Citizen and Americans for Prosperity. But before we start Kumbaya, the chorus must sing a synchronized tune if it is to prevail over the utility noise machine.
Congress gave birth to the competitive power industry half a century ago amid international energy market turmoil. We again find ourselves in turmoil but have the luxury of decades of experience with partial energy competition. It’s time to finish the job. Should progressives’ competition agenda focus on real monopolies and conservatives stay true to their roots, we can forge a competitive energy consensus cast in climate and economic revitalization.
Devin Hartman is the director of energy and environmental policy at the R Street Institute.