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» Bordeaux Energy Colloquium Action Research Project

» Action Items to Watch

Action Items to Watch:

A key part of this research is to identify which actions the industry will embark on given the hypothesis of a move toward a competitive marketplace. The following top ten list derives from the dialogues at the Colloquium but is in great part personal hypotheses. They are intended to be predictive in nature, taking a position to test its validity. These actions address some of the most pressing issues captured at this point of the market's evolution. The resolution of key issues in the industry rests in successful implementation. These will be monitored over time to determine their efficacy.

1. Pricing Volatility: Clearly customers must be able to respond to pricing signals, particularly in times of high demand and scarce supply. Giving customers choice about an acceptable level of volatility through various pricing plans is a solution that works in either a regulated or competitive environment.
   
   
2. Phased in Retail Access: Larger industrial and commercial customers have more benefit and thus more incentive to actively engage in a competitive energy market. Phasing in retail competition from larger users to residential users over time allows for market mechanisms to be worked out over a smaller number of users.
   
   
3. Intelligent Grids: The real-time nature of electricity makes scheduling access to shared grids a daunting task. The use of real-time metering linked to central control systems allows for more responsive action, particularly in high use times.
   
   
4. Demand Reduction Bidding: Allowing Demand side management programs to bid reduced or avoided demand the same way generation bids into the market. Real time metering and smart control systems at customer sites will enable accurate reporting.
   
   
5. Less new Transmission, More Upgrades: It is becoming too costly and too difficult to build new transmission systems to meet increasing local demand and the intrastate wheeling of power. New technologies will be incorporated into existing grids to enhance the flow of power. The interconnection of central control systems with demand side programs will also open up significant transmission congestion.
   
   
6. Fewer peaking plants, more distributed resources: The build up of gas-fired combined cycle peaking plants will taper off. The few hours per year of critical peaking time and the inability to price that power at 'scarcity' rates will curb investments in central peaking plants. A move toward local control of small-scale distributed resources will be combined with the increased control schemes and real-time metering to create pockets of power closer to ends of the grid. Of course, this also has a positive side effect on opening more transmission space.
   
   
7. New Financing Vehicles: The investment community will have to change its perspective on 'old regime' financing of plant and infrastructure. Guaranteed 30 year returns are becoming a thing of the past. Like the housing markets incredible creativity with home financing, the investment community will begin to offer new financing packages that spread around risk and offer variable rates.
   
   
8. Renewable Energy Credit Program: The continued support of renewable energy will require incentives within the market. The mandating of percentages by State government is one way to handle the problem. A second more market driven solution is to create a renewable trading program is a similar fashion as the emission trading. Percentages set by the state are then regulated primarily by market mechanisms that are allowed to trade credits as they see necessary.
   
   
9. Regional Regulatory Control: The physical reality of the interconnectedness of the power grids will force a shift from State legislative and PUC control to regional centers such as proposed by FERC's RTO's. State legislative and PUC control will focus more on public good programs such as lifeline and economic development programs.
   
   
10. More Federally mandated programs: Due to the scale of the recent blackouts, the federal government will once again play a strong role in energy policy. Mandating the construction of transmission lines, nuclear power plants and domestic oil and gas production, will fall under the domain of the feds. Whether FERC continues to be the enforcement agency will greatly depend on the issue of State rights.