The Foundation for an Affordable, Reliable Clean Energy Transition: New E3 Report Shows Path Forward for Competitive Power Markets

As we seek to reduce carbon emissions today while planning for reliable and affordable electricity tomorrow, we must develop and embrace practical solutions that unleash competition to deliver the best results. At EPSA, we’re committed to advancing these workable solutions to help ensure a least cost, reliable and sustainable energy transition.

 That’s why we supported the development of Energy + Environmental Economic (E3)’s latest report, “Scalable Markets for the Energy Transition.” Its findings are an important new addition to a critical question facing policymakers, advocates and the energy industry today – how can competitive power markets build on the success they have already delivered to consumers, the environment and most importantly, a reliable electric system?

 Power market results continue to prove that cleaner, more reliable and affordable energy is possible. Take the nation’s largest grid operator, PJM Interconnection. Just this week, PJM announced the results for its 2022/2023 Base Residual Auction (BRA), which yielded lower costs for consumers and new renewable integration. [I dig further into the results here.]

These savings from the most recent auction will only serve to increase the $3.2-4 billion PJM’s 65 million customers save annually, plus a 39% drop in carbon emissions since 2005, and it’s clear why three out of four Americans say competitive electricity markets deliver results.

 While no market is perfect, the introduction of electric competition over twenty years ago brought significant benefits to consumers, the grid and the environment. But how do we modernize electricity markets to decarbonize the grid at a cost consumers can afford?

 E3’s analysis affirms our core principles: wholesale electricity markets and competition bring tremendous value to consumers and the grid and can continue to facilitate carbon reductions and clean energy development. What’s more, E3 finds that the structure of competitive markets as they exist today should be preserved – not upended nor abandoned.

 We’ve outlined the report’s key takeaways here.

 EPSA’s Director of Strategic Policy and Government Affairs has also shared a thought-provoking analysis on our PowerFacts Blog.

 So this begs the question – where do we go from here?

To start, the benefits of competitive markets cannot be overlooked. Wise and prudent reforms will help ensure that the market design that has so far brought substantial benefits to consumers and the environment continues to advance progress. We recognize this truth, as do many policymakers and former federal regulators.

 Specifically, reliability must continue to be the primary focus for electricity markets – a goal that can in part be accomplished by utilizing capacity markets to help ensure resource adequacy. A sustainable energy transition that moves our nation and economy forward must be built on a strong foundation that doesn’t lose sight of energy policy’s fundamental purpose: keeping the lights on. Once that objective is ensured, then we can focus on other important issues around power generation.

 Prior analysis by E3 shows we can cost-effectively reach emissions targets without hampering reliability if policies that regulate carbon directly are implemented, such as an economy-wide carbon price or well-designed clean energy standard (CES). But as we wait for further direction from policymakers, societal goals to procure clean energy should not interfere with grid reliability and should occur independent from existing wholesale electricity markets.

 Reaching solutions to today’s energy challenges requires bringing thoughtful approaches to the table. The approach of building on market successes to target emissions reductions is backed by data – and could be a real driver in ensuring the best possible outcome at the least cost.

We are pleased to have worked with E3 again to help bring this valuable new analysis and set of recommendations to the discussion. We welcome your thoughts – we’re always talking about competitive solutions here on LinkedIn, Twitter, on www.epsa.org, and our new podcast.

 For a breakdown of EPSA’s key takeaways, see here.