Is Today’s Energy Policy “Saving the Buggy Whip”?

Date: 20 Apr 2012 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

The editor’s column from the March 2012 edition of Public Utilities Fortnightly describes how policy inertia can hamper distributed renewable energy development.  To illustrate, Michael T. Burr draws on the history of the automobile:

When the first Model-Ts sputtered down the street, few people could’ve imagined the remarkable transformations they’d bring. Instead, they only saw a threat to their way of life…[inspiring] law- makers to enact ordinances.  [For example, ] in Pennsylvania, when you see an oncoming horse-drawn carriage, you’re required to pull your car to the side of the road and cover it with a blanket so as not to alarm the horses.

This reactionary policy, among many such laws, wasn’t going to overcome how the automobile destroyed the “apparently burgeoning industry of buggy-whip manufacturing,” but it was a last-ditch effort to preserve the status quo.

Are today’s policies similarly trying save the “buggy whip” of the electricity system?

Burr notes that all of the perspectives featured in their February edition assumed that “the central- station system that Thomas Edison created in the late 1800s would continue as the most economical way of generating and delivering electricity.”  And in fact, there are many ways that policy reinforces the status quo, from federal bonus payments for big transmission projects to the simple fact that most utilities make their best financial return on new infrastructure, not by interconnecting distributed renewable energy projects.

Burr notes that this distorts the economics of distributed versus centralized generation, delaying any transition to a more decentralized system.

The pro-transmission bias inherent in the system virtually guarantees the transition will occur later, rather than sooner. That’s because DG, located at or near the electric load, must not only beat the price of retail power, but also the price of wholesale power that benefits from the socialized investment in a huge transmission grid. After all, customers are stuck paying the bill for those big trans- mission lines whether they get their power from next door or the next state. And that, according to DG advocates, is anti- competitive and ultimately detrimental to the public interest.

The policy and regulatory environment has to change in two ways.  New policies need to open the electricity system, breaking the utility “grid lock” by allowing outsiders to connect cost-effective distributed renewable energy systems.  Everything from robust net metering to simplified interconnection to feed-in tariffs make a difference.  (note: I tackle these issues in Democratizing the Electricity System, published 2011)

Regulators must also change, challenging utilities to prove that financially attractive transmission lines can be as lucrative for ratepayers as for their shareholders, and that new infrastructure can beat aggressive conservation, energy efficiency, and distributed renewable energy investments.

Without these changes, policy history repeats, and the buggy whips of the 20th century will continue to dominate the electricity system of the 21st.

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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.