The latest dispute over PJM’s bidding rules has raised the level of uncertainty in organized electricity markets. Efforts at reform have created a market structure so jumbled that it can’t produce...
Not Your Grandfather's Utility
require the retirement or shuttering of nearly 150 net GW of coal power and the addition of 345 net GW of renewable power. The incremental capital cost alone for this shift could top $2 trillion. DOE also notes that under the GHG pricing scenario, a residential customer can expect to pay more than double what is currently paid for a kilowatt-hour of electric energy—more than 23 cents on average.
Even under this costly scenario, climate change environmentalists aren’t likely to be thrilled. A 670 MMT reduction in U.S. carbon emissions might sound significant, but represents less than 1 percent of total annual worldwide atmospheric GHG, including those from non-anthropogenic sources.
What will then perhaps be most interesting from a policy perspective is whether the customer compact itself does in fact change. That is, after safety, reliability and power quality, will the industry, its regulators and its customers ultimately agree and insert the need for “clean” before utilities head off on a least-cost path? If so, cost recovery issues should work themselves out, regardless of the potential mandates the industry might face. One thing is for certain, though—we can’t have it both ways: costly mandates without full consumer understanding and support.
I think that is a reality on which even your grandfather could agree.