Sunil Sharan is the founder of Sierra Consulting, a renewable energy consulting firm. He was formerly with General Electric, where he served as director of GE’s Smart Grid Initiative from 2008 to 2009. He has worked in the clean-energy industry for over 11 years, and can be reached at sunil_sharan@yahoo.com.
The bankruptcy of the solar energy company, Solyndra, not only cost taxpayers over half a billion, it also dealt a serious blow to the nation’s adoption of clean energy. The Obama administration’s attempt to jump-start the clean energy sector by picking favorites begs the question whether the federal government, instead of picking winners and losers in the battle to transform the nature of America’s energy use, should, instead, step back, enable adequate oversight and set the stage for the market to decide for itself.
The electric power sector contributes about 40 percent of the nation’s total carbon dioxide emissions, according to the Department of Energy’s Energy Information Agency (EIA). That total is greater than any other sector of the U.S. economy, including transportation. Deregulation, or opening the nationwide electricity sector to competition — a long-forsaken policy at the federal level — deserves fresh consideration.
Many American utilities have long operated as virtual monopolies, so much so that their captive markets are often embedded into their own names. Georgia Power, Southern California Edison, Detroit Edison, Nevada Power — the list is long. Aspiring electricity providers have traditionally been barred, first by federal regulations, and then by certain states, from entering the bastions of incumbents. In such an un-competitive environment, customers are often reduced to “rate-payers” with little-to-no choice when it comes to their energy services or suppliers. Guaranteed revenue streams have made utilities averse to innovation.
Contrast the situation in the U.S. with that in Europe. The European Union mandated liberalization — their term for deregulation, or electricity competition — to come into effect throughout the region four years ago. The passage of the E.U. mandate released competitive forces. The looming threat of someone like the French utility, EDF, making a move towards Italy in an effort to grab a chunk of its customers motivated the Italian utility, Enel, to roll out the world’s largest grid modernization project in 2001. Enel now has over 32 million smart meters operational in Italy, and offers a variety of customer-care services. (Full disclosure: From 2000-2006 I worked for Echelon Corporation, a company that provided Enel with communications technology for its smart grid project.) Installing the meters cost Enel 2 billion euros in total (slightly less than $2 billion in 2001 dollars). The payback has been swift, because the meters, according to documentation provided by Enel, save the utility more than a billion dollars a year in operating expenses. Solar energy, wind power and smart meters are all flourishing in Europe, aided in part by attractive, introductory tariffs, as well as a mandatory target that a 20-percent share of energy consumption come from renewable sources by 2020. Competition has driven industry consolidation. Big players such as EDF, Enel, Germany’s E.ON and Sweden’s Vattenfall are snapping up smaller utilities and improving productivity through economies of scale.
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