Free Trade in Electric Power
70 Pages Posted: 3 Mar 2017 Last revised: 20 Sep 2018
Date Written: March 1, 2017
This Article develops the core legal framework of a new electricity-trading ecosystem in which anyone, anytime, anywhere, can trade electricity in any amount with anyone else. The proliferation of solar and other distributed energy resources, business model innovation in the sharing economy, and climate change present enormous challenges — and opportunities — for America’s energy economy. But the electricity industry is ill equipped to adapt to and benefit from these transformative forces, with much of its physical infrastructure, regulatory institutions, and business models a relic of the early days of electrification. We suggest a systematic rethinking to usher in a new trading paradigm and propel the electric utility industry into the 21st century.
Our model has the potential to revolutionize the way electricity is generated, delivered, and used without requiring dramatic legal reform or radically new technologies. Instead, this Article draws on recent Supreme Court precedent and readily available technologies to democratize the electric grid and unlock free trade in electric power. We refine and expand pilot initiatives currently under way in California and New York to combine existing wholesale markets with new trading platforms similar to Airbnb and Uber. Enhanced market access will empower previously captive consumers to emancipate themselves from their local utilities while also ensuring the proper valuation and integration of a diverse portfolio of energy resources.
Transformative change, however necessary and beneficial in the long run, will not come easy in an industry famous for its resistance to reform efforts of any kind. Accordingly, our proposal does not start with a clean slate but, rather, envisions a hybrid system where competitive markets coexist with traditional utility governance structures while regulators and stakeholders adjust to the new trading paradigm.
Keywords: Renewables, Energy, Demand Response, Electricity, Wholesale Markets, FERC, Solar, Wind, Energy Storage, Sharing Economy, Electric Grid, Transmission, Utility Business Model, Distribution
JEL Classification: H10, H70, K32, L10, O30, O10, 038, Q20, Q28, Q40, Q42, Q48
Suggested Citation: Suggested Citation