Innovation through competition will drive America’s energy transition

OPINION:

This September, the California Independent System Operator (CAISO) issued flex alerts for over a week, requesting residents to severely limit their electricity use which included imposing limits on electric vehicle charging, recommending thermostat settings be set at 78 degrees or higher, and limiting the use of appliances and lighting. On September 6, the California Office of Emergency Services sent an alert to approximately 27 million cellphones throughout the state, warning “Power interruptions may occur unless you take action.” One has to ask how is the grid teetering this close to the edge in a country with the resources we have in the United States? Policy decisions at the state and federal level that are not based in reality, that’s how.

Competitive electricity markets have continuously proven their ability to deliver reliable power, while also providing that energy in a cost-effective and increasingly clean way. Advancing this market model throughout the energy transition will be key to continued economic growth and improved environmental outcomes. To maintain reliability, policymakers must level the playing field for all energy solutions and should embrace competition to drive the innovation needed to achieve government-mandated, net-zero goals.

First, policymakers must be honest with the public about the significant role dispatchable power solutions, like natural gas, continue to play in the power sector. Cutting off these reliable, flexible, dispatchable and increasingly clean resources from the market too soon will lead to a less reliable grid and undermine our nation’s ability to implement more renewable resources onto the grid. Until equally reliable and flexible resources are built and actively supplying the grid, states should continue to ensure energy planning is done with reliability front and center not solely based on a preference for certain resources that alone simply aren’t currently up to the job.

Second, the notion that reliability should be sacrificed to have cleaner power generation is patently false. Competitive markets are delivering the innovations needed to deliver traditional power resources in a cleaner and more efficient way. From 2005 to 2020, the U.S. power sector reduced emissions by 40%, largely driven by natural gas, solar and wind, and battery storage deployment throughout the country. The biggest share of this reduction came from switching from coal-fired plants to natural gas plants. Recognizing the energy transition will come to fruition over the course of decades, not years, is critical for public acceptance of all energy solutions. U.S. consumers are accustomed to flipping a switch and the lights turning on; continuing to have existing dispatchable resources like natural gas available is essential.

Finally, the recent passage of the Inflation Reduction Act (IRA) delivered a slew of energy incentives, but we should reexamine whether resources should be committed to commercially viable technologies and fuels or would they be better spent on R&D and technologies that are near commercial-ready solutions, like hydrogen and carbon capture and storage (CCS). These subsidies can help scale-up new technologies and sunset once price reductions are achieved through economies of scale. Discontinuing subsidies once they have achieved their objective (scale) should be the expectation because doing so will reduce costs for taxpayers throughout the country and create a level playing field for all energy resources. Tax credits were never meant to be used as a corporate welfare benefit for mature, commercially competitive technologies that ultimately deliver benefits to shareholders under the cover of emissions performance.

Looking ahead, the electricity grid will play the central role in the energy transition. Multiple sectors, including transportation and space heating, have identified electrification as a key solution for decarbonizing. Demand on the grid will rise and reliability will be the essential factor for the bulk of the U.S. economy. To ease that transition and the strain on the electric grid, policymakers must implement the reliability policy framework required to ensure a smooth, cost-effective transition for consumers.

A cleaner and more cost-effective energy future is within reach through a competitive framework. Competitive power markets and power suppliers are leading the way by saving customers money, spurring innovation, retiring older, higher emitting resources, and investing in new low and zero emission resources, and accelerating environmental progress. Maintaining a diverse and flexible mix of both dispatchable and non-dispatchable resources will create the clean energy future that many policymakers desire. If we are to realize that vision, our grid will be served by renewables, nuclear, natural gas, hydro, battery storage, and next generation solutions still in development today.

• Todd Snitchler is president and CEO of the Electric Power Supply Association, which represents competitive power suppliers providing about 150,000 MW of electric generation capacity to America’s grid.