Op-Ed: Customers and climate need competitive electricity markets to truly win

Ed Potosnak | September 13, 2021 | Energy & Environment, Opinion
Competition is ‘essential to delivering the most efficient and cost-effective transition to a carbon-free grid’
Ed Potosnak

The recent report from the Intergovernmental Panel on Climate Change details that the world risks increased catastrophic impacts without a rapid reduction in greenhouse gas emissions. The report highlights the importance of reaching net carbon emissions by 2050, a goal embraced by the Murphy administration.

Gov. Phil Murphy’s Energy Master Plan stands out as a leading environmental achievement. It outlines key strategies to reach the administration’s goal of 100% clean energy by 2050. Clean energy is vital to the future of the state from both environmental sustainability and economic development perspectives, creating thousands of good local jobs that can’t be outsourced in wind and solar.

But well-informed legislation and bold executive orders are only half the battle.

We must remember that maintaining New Jersey’s competitive electricity market is also essential to delivering the most efficient and cost-effective transition to a carbon-free grid. It was no accident that New Jersey came to be a leader on clean energy, but how we got there is often overlooked.

A key part of that is our competitive market model that holds producers accountable to consumer needs and preferences and carefully balances the way electricity is produced, transported and consumed in our state and region. This model positions us to become a clean-energy leader well before 2050, but some have leveled inaccurate criticisms and made spurious claims about competitive markets. The truth is competitive markets work and will be critical to meeting and surpassing our environmental climate commitments while creating jobs and ensuring New Jersey customers aren’t unfairly extorted.

Today, there are two prevailing types of power market structures in the United States. Many of the U.S.’s markets are vertically integrated, meaning monopoly utilities control the production and distribution of power from start to finish. New Jersey, on the other hand, is one of 13 states with competitive wholesale markets, being served by the PJM Interconnection regional transmission organization. Unlike monopoly models, the competitive model encourages competitive pricing for customers, ensuring they have access to affordable electricity. One study, for example, by the Renewable Energy Buyers Alliance Institute and the Brattle Group found that “wholesale markets reduce costs for customers.”

The value of competition

But the value of competitive markets doesn’t just stop with prices. The design of the competitive market also speeds the shift to renewables by empowering green-minded customers to buy from sellers whose renewable energy offerings and practices match their values. In other words, customers in New Jersey have a choice, and with a simple internet search, can buy electricity produced from greater levels of clean, renewable energy sources.

Competitive markets are helping drive our transition to clean energy and the results are tangible. In fact, 80% of renewable energy generation in the U.S. has taken place in competitive wholesale markets. Within the PJM footprint, which includes New Jersey, CO2 emission rates fell 39% between 2005 and 2020. These successes were a central reason why a bipartisan group of former Federal Energy Regulatory Commission commissioners and chairs earlier this month openly advocated the benefits of organized wholesale markets and called for their expansion. They understand firsthand that competition works.

As we look to meet the goal of 100% clean energy in New Jersey’s Energy Master Plan, we must build on the progress that competitive markets have already made in accelerating emissions reductions, spurring technological innovation, and securing enough power resources to reliably meet growing demand.

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