The Pacific Research Institute recently released a report that is just the latest evidence that competitive markets reduce customer costs while also improving reliability and accelerating the transition to clean energy resources like wind and solar.
While we previously reviewed this report, we thought it worth revisiting while Congress argues about how to subsidize what is already happening in areas with competitive markets. Keep in mind that if the current Clean Energy Payment Plan (CEPP) goes down, which is likely, that a better alternative already exists. Namely, removing obsolete regulatory barriers to market entry for independent generators and service companies. Consumers are already demanding clean energy where the market allows them to choose and there are plenty of innovative private-sector companies ready to meet that demand.
According to the PRI report, from 2015 to 2020, wholesale electricity prices fell substantially throughout the Northeast. For New England, they fell by 44.3%. For New York, they fell by 26% to 44.8%, depending on the part of the state. In the PJM region, which primarily covers the Mid-Atlantic and parts of the Midwest, they fell by 41.7%.
Furthermore, over the past 25 years, in the 14 deregulated states where customers can choose their electricity supplier, retail prices rose much less than they did in most other states.
In terms of reliability, states in deregulated states had lower SAIFI and SAIDI scores, meaning outages occurred less frequently and didn’t last as long when they occurred.
The emissions intensity of electricity produced in deregulated states fell 12.1% compared to 7.3% for other states, from 2008 to 2018. This is largely due to the earlier and more frequent retirement of coal plants and combined with greater investment in renewable generation.
These trends are likely to continue, as well, as exemplified by the latest PJM capacity auction, which had been delayed due to the disputes over the Minimum Offer Price Rule, which has since been largely rescinded. The market-clearing price fell from $140 / MW-day to $50 / MW-day. This was the result of a substantial drop in capacity from coal while the capacity of other major resources, including gas, nuclear, wind, and solar, all rose. The next capacity auction will be in December 2021 or January 2022. With the influence of the MOPR removed, it’s expected that wind and solar will continue to displace coal.
Of course, not all deregulated states have a capacity market. ERCOT, in Texas, is an energy-only market. While it can be argued that was partly to blame for its outages resulting from insufficient generation last February, it’s also possible that the lack of a capacity market has helped accelerate its transition to clean energy, since it has the most wind generation in the country and in 2020 was the fastest-growing state for utility-scale solar development, with that likely to remain true for 2021. It could even overtake California for having the most solar capacity and generation, overall, within a few years. Meanwhile, coal generation in the state continues to decline there, as well.