The following is a contributed article by William J. (John) Berger, chairman, president and CEO of Sunnova.
The U.S. power industry needs a revolution. Two recent pivotal developments indicate it may have just begun.
In early June, President Biden invoked the Defense Production Act to encourage domestic renewable energy manufacturing and he put a two-year moratorium on additional harmful tariffs that would have restrained the growth of the U.S. solar industry. Separately, but perhaps even more importantly, Republican Florida Governor Ron DeSantis recently vetoed a bill that would have authorized utilities to impose additional uncapped charges on residential solar customers to recoup lost revenue.
While we know fighting for climate and environmental justice was on President Biden’s agenda, it’s unlikely that Governor DeSantis became a climate change activist overnight. What is clear though is how he refused to grant utilities operating as monopolies the opportunity to silence their opposition, which in this case was distributed solar. This decision signals to the state of Florida — and utilities everywhere — that there can be, and should be, a limit on anti-competitive rent-seeking behavior from monopolies.
Today, the U.S power system is built upon energy infrastructure that was invented at the turn of the last century, leaving our power industry dependent on an outdated system of subsidies and monopolies. The long-standing utility monopoly model is a relic from a time when it was deemed a social good to have a single wire going to a single home, and when consumption of power was ever-increasing. Times have changed. Solar, batteries, smart generator sets, artificial intelligence, and software have become increasingly available to provide power service directly to homes and businesses. Yet our current power system’s monopolistic ecosystem continues to thwart price signaling, technological improvements, consumer choices and technological advancements.
Energy consumers are demanding more sustainable and reliable options with better customer service — and they want it all at consistently lower costs. They want the power to choose and finally take control of their energy. This can only be achieved by allowing competition in the power industry. The restructuring of the U.S. power industry should be a rare bipartisan area of agreement. Democratic platforms support mechanisms that address solving climate change. Republican platforms support bringing forth free markets and capitalism. Both sides of the aisle support the lower prices, energy security and innovation that competition will bring.
The technological innovation that the energy industry has experienced over the last few years has opened a new world of energy options for consumers. But we must transition the industry to make it more competitive, balanced and market-based. Instead of having completely centralized resources and control, the U.S. power industry of the future should have an integrated system made up of a hybrid of centralized and decentralized assets. This should result in a more durable, more reliable and more decarbonized power system that is personalized to the consumers it serves.
I foresee a future energy industry that looks much like the internet does today: intelligence will be pushed to the endpoints of the power system, with the American home taking on the role of generation, storage, energy management and grid support.
While the President's recent move to finally support the solar industry is a marker for progress, Democrats and Republicans should all agree on giving consumers access to competitive electricity generation that supports technological advancements and provides better energy services and solutions to fight climate change and provide better energy security. Climate change can only be solved through affordable energy solutions that can be developed quickly.
It is human nature to think about change in a linear fashion, but no technology has ever been adopted this way. Technologies and transformations of industries are shaped along an S-curve. We are seeing changes move rapidly along that curve now, but to accelerate the transition we must loosen the monopolistic stranglehold that utilities have on America and give consumers the power to choose.
As utility rates skyrocket, consumers will continue to suffer. U.S. electricity prices have been rising at the fastest pace since 2008, with utility rates increasing nearly 25% from 2021 to 2022 in states such as New Jersey and California, according to utility rate data from Genability. Consumers will absorb further costs in the coming years as power companies return to the safety of the status quo and spend enormously to replace aging and inadequate centralized infrastructure and continue to overspend on unions’ benefits and compensation, payments to lobbyists and politicians, and project cost overruns.
It has never been in the DNA of utilities to decrease rates and cut costs. The system is set up so that the more money they spend, the more profits they make and the more they pass on to consumers, creating a runaway freight train on costs that must be stopped.
The clear solution is to provide consumers with choice. We must end government mandates and allowances of monopolies in the U.S. power industry and bring market-based companies into existence. We must give Americans a choice when it comes to how and where they source their energy and at what price. We must break up the utilities and open the poles and wires to all types of generation and customers, where centralized and decentralized generation are treated equally, both in terms of the responsibilities — such as reliability — and value that is paid to companies on both sides of the meter.
I call on all politicians to join Governor DeSantis in standing up for the consumer. It’s time to take the power back from utilities and give it to the people. Open markets and competition are essential and what has made this country and our economy great. As America confronts stagflation, we are at a seminal moment in the energy industry, and competition and consumer choice will provide the bedrock for a robust and reliable 21st century energy system that will meet the global challenges we face of energy affordability and climate change.