A free-market think tank is gearing up for the post-election transition with a plan to gain bipartisan buy-in on energy policy by turning away from contentious environmental regulation and toward the nation's unsung electricity markets for a solution.
The R Street Institute, with its goal of promoting free markets, sees the nation's large federally overseen electricity markets as a somewhat undervalued and misunderstood resource that most consumers rely upon everyday but don't realize exist.
"Regardless of who holds the power in the next administration, our elected officials will face major decisions regarding the future of electricity markets," said Devin Hartman, senior fellow electricity policy manager at the think tank, in an email. "Healthy markets are best situated to harness evolving technologies and shifting market fundamentals, especially low-priced natural gas.
"The next administration should espouse competition, market integrity and choice as the guiding principles to usher the grid of the future," he said.
The power markets, which are run by enormous public power utilities called regional transmission operators, or RTOs, serve as the backbone for keeping the lights on in some of the most densely populated areas of the country, while simultaneously keeping the cost of energy as low as possible.
Overseeing the sprawling multi-state transmission operators is the nation's grid watchdog, the Federal Energy Regulatory Commission. R Street sees the markets as one the nation's most unsung success stories for using a market-based system to dictate energy policy. But senior researchers at the think tank also see support for the markets as in flux, partly because of a lack of understanding and the benefit they serve among policymakers.
Rather than reinvent the wheel, R Street wants the next administration and Congress to get behind the commission and its regional markets, or risk losing the market leverage they provide, which could result in rate increases and other problems that could undermine the gains made through increased natural gas production and the rise of solar power and other new forms of electricity generation.
"We believe free markets work better than the alternatives," according to the think tank's website. "At the same time, we recognize the legislative process calls out for practical responses to current problems. Toward that end, our motto is 'Free markets. Real solutions.'"
Because of this focus, the top recommendation to a new administration is: "Competitive markets have yielded considerable benefits to electric consumers and have driven innovation. We can and should build on this success," according to an outline of the recommendations provided to the Washington Examiner.
With support for the competitive markets that the commission oversees, the group also wants government to get out of the business of "picking winners and losers," which is number two on its list of recommendations. That might be difficult for Democratic nominee Hillary Clinton and her plan to deploy 500 million solar panels, but it is not just targeted at renewables. In many cases, renewable energy can be competitive.
The institute would target suggestions being floated by the industry to subsidize economically uncompetitive power plants such as nuclear reactors and even some coal plants. The nuclear power industry is lobbying the commission heavily to develop new pricing rules in the electric markets that would help older nuclear plants fare better amid low natural gas prices and increased competition from renewables.
"Government should not be in the business of picking winners and losers, which means we should avoid policies that aim to dictate the electric fuel mix, particularly through technology or fuel mandates and subsidies to bail out unprofitable power plants or incent the construction of plants with technologies that aren't market ready," according to R Street's second recommendation.
But newer technologies face uphill challenges.
"Emerging technologies face considerable regulatory burdens and barriers to market entry," the think tank's third recommendation begins. "We should emphasize policies that make it easier for unconventional technologies to compete based on their merits, not policies that subsidize new technologies struggling to find a foothold in the market."
But this work isn't for the Energy Department's sprawling fleet of labs, or for the Environmental Protection Agency, which has been criticized for blurring the line between energy and environmental policy. "This work can start at the Federal Energy Regulatory Commission," according to the R Street recommendations. "FERC has begun to explore barriers for energy storage, and there's a variety of other advanced technologies that should be examined as well."
It said the House Energy and Commerce Committee recently began a series of hearings that "started a deep dive on the way markets function." R Street points out that actions like that "can reveal bipartisan policies that improve the ability of technologies to compete in the market and deliver the benefits of electricity competition to households."
Most of the environmental regulations being implemented through the EPA can be solved through electricity policy and commission-overseen policies, the institute says.
"Well-designed electricity markets can deliver better environmental outcomes than the myriad regulatory policies the industry grapples with today," according to the series of recommendations. "This occurs because competitive markets seek to reduce costs, including those creating pollution, through innovative practices.
"Improving market design and maintaining market integrity — or minimizing out-of-market political interventions — is a recipe for economic and environmental success."
On top of that, policymakers should support increased federal research and development to "complement," but "not substitute for" private-sector investment," the institute says.