Energy in the U.S. is still a monopoly – Deregulate? Decentralize?
This is not my usual fair, but it is highly political. And it affects EVERYBODY.
On Thursday, September 29th, at the Penn Club in Manhattan, the Financial Policy Council (FPC) and Rational Energy will sponsor “Chasing Renewable Energy Investment, Obstacles, Distortions, and Ponzi Schemes” with an expert panel to discuss what is stopping the renewables market from reaching its worldwide potential.
This is sponsored by the parent company of PBP. Yours truly is a panelist.
Power is a monopoly. It is multiple monopolies, not just in the U.S. but mostly around the world. You almost never have an option as to which power company you can use. Unless of course, you have the wherewithal to generate your own.
The transition to renewable energy is much desired in the marketplace. The “branding” is so large and prevalent that it will never go away.
Liberals are so anxious to see this through that they push endlessly. Conservatives always love to see businesses thrive, including renewables, but are adamantly against the subsidies and the political machinations that are interfering with markets. We see in places like California that the “transition” to renewable energy is rough and slow.
I believe that governments and monopoly power companies are in the way of a transition to a better, more robust and cleaner power grid.
The power companies and the local governments will argue that power is so important that any attempt to deregulate and add more competitors would destabilize the grid and cause massive problems. But is this true?
Funny, those of you who are a bit older might remember when AT&T and Bell Telephone ruled all communications in the U.S. They said the same thing. Communications were so important that to mess with their monopoly would be a disaster that would sink the country. It HAD to be left in their hands. We learned better.
I’m sure this is what the banking industry thought, and the airline industry thought when they were deregulated, that disaster was imminent and the country would collapse.
But what really happens when you deregulate?
According to a piece of research by Gary Kim, writing for Lucent Technologies in the 1990s, the same things always happen when you deregulate and open up a market. First, you have thousands of innovative companies entering the market, it is utter chaos. They compete for customers, they add exciting new services. New protocols are developed, new ways of doing business are formulated, tested and marketed. And lots of fighting, lawsuits, etc. (great fun!).
Second, the industry begins to consolidate. Larger companies buy the smaller ones, and in turn, are bought off by even bigger ones. If your company isn’t bought, then you are irrelevant.
Finally, you have a market that is stable with several very large players, and a marketplace with access for smaller ones, It becomes a completely different market, more robust and poised to incorporate new ideas as we think of them.
We have seen the benefits of deregulation and indeed, decentralization in an industry. The internet is decentralized. Cryptocurrency is decentralized. Cellular telephone has a robust competitive environment. Decentralization means that a lot of people can profit, not just a few.
This is something I will be discussing at the event in New York on the 29th. If you can to be around and want to see, you can register here (open bar and elegant finger food will be served…).