For Green Power, Bust Monopoly Power
If Americans are serious about ever truly launching a green energy revolution, they will need to agree to bust up some very entrenched monopolies and special interest groups.
Perhaps the most glaring example of state-sanctioned monopoly is the public utility. You likely have one of your own. Or rather, you have one water utility, one gas utility, and one electric utility. Once upon a time, you had only one phone-service provider as well. It was a monopoly known as AT&T, created and sustained by the government. These monopolies control the generation, distribution, and prices of our most basic necessities. They are tightly regulated, and their prices are fixed.
Somehow all this government regulation is supposed to protect consumers. But a much better protection would be to give consumers choice. In a free market, consumers would be able to move from one energy provider to the next, much like people do now with cell phones or supermarkets.
Of course, many see this sort of deregulation as a threat. The infrastructure demands are simply too great, the argument goes, the stakes too high. Who would lay all those water pipes and gas lines? And, of course, what about Enron? Won’t those greedy corporations take advantage of people if left to their own devices?
In Texas they found an answer to these questions. Texans can choose their own electric provider, and providers compete heavily for customers. The state lays the power lines - the "natural" monopoly - and then private retailers compete for customers. Customers can go to the Texas Electric Choice website to compare competing electricity retailers, shop rates, and switch to a new provider if they’re unhappy with their current one. This creates competition, and reduces administrative costs. Consumers benefit from lower prices and better service. Likewise, barriers to entry in the energy sector are far lower, allowing anyone with some capital and a business plan to start up their own energy retailer or wholesaler.
Perhaps not surprisingly then, it is Texas, not California, which has the largest installed base of wind generation capacity in the country. This isn’t just because of all the flat, windy Texas plains either. It’s because Texans are able to sell their wind energy to competing buyers on the market rather than simply back to their local utility.
Currently most utilities will buy back solar or wind energy at a dictated rate. This may be better than nothing, but it's hardly likely to inspire a future generation of green entrepreneurs. In a green energy market, people could sell back their energy to the highest bidder. They could even hop on the grid and sell to individual consumers instead of utility companies. What better way to promote innovation and green job growth than to make energy profitable and competitive?
Indeed, the entire green revolution rests on our ability to put power generation back in the hands of private entrepreneurs. Electric cars require power wherever they go, and unless private sellers can offer electric "pumps" for green vehicles, consumers of electric transportation will have a hard time finding locations to "gas up." Markets need to be able respond to the new demand generated by green vehicles, and in our current system this is all but impossible. Utilities were never meant to handle the complexity of a national, green energy market, let alone the demands of national transportation.
Just as importantly, markets are better gauges of scarcity than central planners. When power supplies fall, prices rise in response. If prices stay high, then demand falls accordingly. This allows consumers to self-ration. If we let consumers understand the real cost of their power consumption, they'll be much more likely to turn off their lights when they aren't being used, and much more inclined to look into alternative forms of energy when traditional energy sources become too expensive - especially if their investment in green technology could make them a buck or two down the road. Conversely, when energy is cheap, there’s no reason people should pay more simply because the local utility monopoly says they should.
Obviously the government will have its role to pay in the green revolution, but we should limit that role to laying pipes and power lines, and ensuring that when laws are broken, the perpetrators are punished. The government needs to establish fair-play rules and create a grid, but beyond that they need to let markets work, and allow competition to flourish. A lasting green revolution needs to benefit not only the earth, but the people who live on it as well. Too often the economic costs of environmentalism are overlooked, and too often it is the poorest among us who bear the brunt of those costs. Real cost-saving competition can help change that.
In the end, energy markets can spur a green revolution with real, lasting economic benefits and without the corresponding tax burden or loss of jobs so many traditional environmentalist solutions would require. The same entrepreneurial spirit that led to the Texas oil boom will lead us to a greener future, and competitive free markets, not state-sanctioned monopolies, will be the driving force behind this change.