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End preferences for unreliable electricity

 

Today's grids are being ruined by systemic preferences for unreliable electricity:

1) no price penalty for being unreliable
2) huge subsidies for unreliables
3) mandates for unreliables

Congress should end these now

 

The Opportunity

America, given its combination of abundant domestic energy resources, technological ingenuity, and free-market competition, has the potential to have the best grid in the world—providing electricity that is low-cost, ultra-reliable, and increasingly clean.

The Problem

Although America could have world-leading electricity, the American grid is instead becoming a national embarrassment—with rising costs and mounting reliability problems, most problematically in California and Texas but now spreading around the country.1

The cause

A root cause of America’s cost and reliability problems is extreme preferences for unreliable solar and wind electricity:

1) no price penalty for being unreliable

2) huge subsidies for unreliables

3) mandates for unreliables

Here’s how they work and how to fix them.

Unreliability preference 1: no price penalty for being unreliable

In almost every area of life we pay far more for a reliable service than for an unreliable one. But in electricity, unfair rules make utilities pay the same for unreliable solar and wind as they do for reliables.

Policy solution: Electricity markets should require all generators to meet technology-neutral reliability standards.

 

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Published on 1/11/2023 (20 days ago) Alex Epstein Corner