Archive for December 14th, 2009

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Texas retail electric rates remain higher than neighboring states

December 14, 2009

Michael Giberson

Over the weekend the Fort Worth Star-Telegram published a long story detailing views on outcomes in the restructured Texas retail power market.  The newspaper story might be read as a kind of rejoinder to the view Lynne expressed as she announced the availability of the book on the Texas power market that she edited with Andy Kleit.

This morning Lynne said the book “explores how Texas’s groundbreaking program of electricity restructuring has become a model for truly competitive energy markets in the United States.” I wonder what it meant by the word “model”; I’m not aware of any other state that has chosen to follow the Texas path (at least none so far). In any case, for Texas to become a model, an analyst will have to overcome the perception that the Texas approach has simply caused the state to shift from being a low cost producer to a high cost producer.

Lynne also said: “The authors contend that restructuring in Texas has been successful because the industry is free from federal oversight within the state; because new investments in electricity supply have been encouraged to insure that increased demand for power is met; because restructuring has spurred the growth of more efficient electricity technologies and business models; because the markets integrate wholesale and retail competition; and because the operation of the transmission grid has been changed to maximize its efficiency.”  The Star-Telegram story is no simple-minded hit piece, and it perhaps reveals some of the depth of the reporting that it provides a bit of commentary on each of these five points.

[ASIDE: I'm not sure I'd claim, as the last of the five points does, that "operation of the [ERCOT] transmission grid has been changed to maximize its efficiency.” ERCOT’s zonal congestion management has contributed to additional costs, which are ultimately paid for by consumers. But, as market monitor Dan Jones is quoted as saying in the newspaper story, “Further improvements in ERCOT operation of the power grid next year should make the system more efficient.”]

Posted in Electricity, Energy markets, Regulation | Tagged , , | 2 Comments »

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U.S. government becoming clean energy venture capitalist

December 14, 2009

Michael Giberson

The Wall Street Journal summarizes the news that you already know: the U.S. Department of Energy has become one of the biggest financial forces in the clean energy innovations business.

The DOE hopes to lend or give out more than $40 billion to businesses working on “clean technology,” everything from electric cars and novel batteries to wind turbines and solar panels. In the first nine months of 2009, the DOE doled out $13 billion in loans and grants to such firms. By contrast, venture-capital firms — which have long been the chief funders of fledgling tech firms, taking equity stakes in the start-ups that will pay off if they go public — poured just $2.68 billion into the sector in that time, according to data tracker Cleantech Group.

My gut reaction to this news: it can’t be good.

Of course my gut reaction here my be no more a reliable guide to action than Leon Kass’s repugnace or Michael Sandel’s outrage. Is there data or history available that could calm my troubled nerves? I’m not in principle opposed to government funding for basic or even applied research, but I believe we are well beyond those limits. Here is part of the problem created:

“The existence of an 800-pound gorilla putting massive capital behind select start-ups is sucking the air away from the rest of the venture-capital ecosystem,” said Darryl Siry, former head of marketing at Tesla Motors Inc., a San Carlos, Calif., company that got a $365 million DOE loan in June to build high-end electric cars. “Being anointed by DOE has become everything for companies looking to move ahead.”

The result is that developments in applied clean energy research become focused around the ideas of a handful of people involved in the US DOE’s “deal teams.”

Posted in Energy markets, Politics | Tagged | 2 Comments »

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New book — Electricity Restructuring: The Texas Story

December 14, 2009

Lynne Kiesling

I’m pleased to announce the publication of a book on electricity restructuring in Texas that I co-edited with Andy Kleit. Electricity Restructuring: The Texas Story is unique among applied regulatory analyses in several ways, most notably that half of the authors are not academics, but are instead the actual policymakers who worked directly on the institutional design of what is currently the only deregulated electricity market in the United States. From the press release:

In the early 1990s, the U.S. electricity industry was plagued by cost overruns and stagnant productivity. Many states turned to deregulation to promote innovation and cut costs, a strategy that had worked for the telecommunications, trucking, natural gas, and airline industries. Yet, after the California energy market’s infamous meltdown in 2000-2001 triggered the recall election of Governor Gray Davis, deregulation lost popular and political support. Plans to introduce competition and retail choice in electricity markets were stalled or abandoned nationwide–in every state but Texas.

This volume explores how Texas’s groundbreaking program of electricity restructuring has become a model for truly competitive energy markets in the United States. The authors contend that restructuring in Texas has been successful because the industry is free from federal oversight within the state; because new investments in electricity supply have been encouraged to insure that increased demand for power is met; because restructuring has spurred the growth of more efficient electricity technologies and business models; because the markets integrate wholesale and retail competition; and because the operation of the transmission grid has been changed to maximize its efficiency.

The success of electricity restructuring in Texas proves that deregulation is both feasible and potentially effective. State policymakers’ commitment to competition, decentralized coordination, and ongoing market analysis have made Texas’s electricity industry the most competitive in the country. Electricity Restructuring: The Texas Story offers a unique set of guidelines for deregulation done right.

Posted in Books, Economics, Electricity | Tagged , , | Comments Off

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