To cash in on innovation, remove market barriers for advanced energy technologies

Innovation is a central part of American life. Ingenuity and entrepreneurial spirit have led to the development of new products and technologies that improve upon traditional options. Whether it’s the new iPhone or Uber, the technological leaps that come from innovation benefit consumers and the economy overall.

Recently, politicians have focused on innovation as the solution to challenges associated with energy, especially climate change. From the Democratic presidential campaigns of Joe Biden, Jay Inslee, and Elizabeth Warren to Republican lawmakers like Sens. Thom Tillis, Ben Sasse, and Cory Gardner, we hear a call for innovation as the energy cure-all.

Generally speaking, these calls for innovation mean using taxpayer dollars for research and development in new technologies to achieve deep reductions in carbon emissions. This is a role traditionally played by the federal government and it is essential for technological progress. But just as important is making sure that these innovations get the chance to prove themselves in the market. Without the chance to compete with traditional products, no innovative technology will get the private-sector investment needed to deliver benefits to consumers, the economy, and the environment.

Fortunately, there are reforms that can attract bipartisan support and unleash private sector innovation to grow the economy, create millions of jobs, lower the cost of energy for American households and businesses, and, yes, dramatically reduce carbon emissions.

Over 200 million Americans live in states and regions served by organized wholesale electricity markets. All told, over $120 billion in energy transactions occur annually in these competitive markets. If you live in a state like Pennsylvania, Ohio, or Wisconsin, your energy bill and the resources that power your home and local businesses are determined to a significant degree by these markets.

To date, these markets have provided unquestioned benefits for consumers, including improved reliability, lower electricity prices, and improved access for new entrants and technologies. All too often, however, the regulations governing these markets still give preference to older power sources and stand in the way of new, innovative technologies. Outdated rules prevent billions of dollars in investment in advanced energy resources and keep older, less efficient, higher polluting resources in the market. With advanced energy technology costs now lower than many traditional power sources, these artificial barriers to market competition are also costing consumers money.

Advanced Energy Economy has detailed over 20 case studies of regulatory barriers that discriminate against innovative, clean, and cost-effective energy options in competitive energy markets. Some markets prevent wind and solar farms from getting paid for key services to the grid that traditional power plants like coal receive. In New York and New England, the services that advanced technologies can provide are discounted in ways that traditional power plants are not, even though they perform similarly. More broadly, market designs are failing to keep pace with technological advancement to reflect the full value of advanced energy. 

Our case studies not only point out current regulatory barriers, but also show how they can be overcome when policymakers and regulators work together to foster innovation for the benefit of consumers and the grid. Leaders on both sides of the aisle are now seeing the opportunity to capitalize on innovation in these markets, and steps have been taken to address some of these barriers. For example, Democratic Sen. Sheldon Whitehouse (R.I.) and Ed Markey (Mass.) worked with former adviser to Sen. Mitch McConnell (R-Ky.) and current FERC Chairman Neil Chatterjee to ensure that market barriers were removed for energy storage. Industry and Congressional champions now eagerly await FERC action to provide the same market access for distributed energy resources – a decision that has been pending for over two and a half years.

Advanced energy has made great strides as an industry, providing affordable, reliable, and clean power to Americans, pumping $238 billion into the economy, and supporting 3.5 million jobs across the country. Today, wind and solar represent the vast majority of new electric generation being built, while energy efficiency investment continues to grow and energy storage is taking off.

But companies that provide these technologies still encounter regulatory barriers that prevent their products and services from competing. Policymakers – whether in Congress or on the campaign trail – should follow through on their calls for innovation by ensuring that no market barriers stand in the way of new energy technologies. Removing these barriers would be steps toward expanding the advanced energy market opportunity by an estimated $65 billion – a win for the economy, consumers, and the environment.

Dylan Reed is a Director and Jeff Dennis is a Managing Director and General Counsel at Advanced Energy Economy, a national business association working to make our energy system more secure, clean, and affordable.