Dive Brief:
- Traditionally regulated utilities are more reliable than their counterparts in competitive markets, according to a new analysis by Christensen Association Energy Consulting for the Electric Markets Research Foundation.
- The report, titled 'Ensuring Adequate Power Supplies for Tomorrow's Electricity Needs,' found that the low wholesale prices pervading the competitive markets are creating a resource adequacy problem as new generation is too costly to invest in and the returns are low.
- Other impacts on resource adequacy include the effects of nuclear plant retirements, fuel-switching from coal to natural gas and subsidized, and the addition of subsidized, intermittent reneable generation, the study found.
Dive Insight:
"Whether the electricity sector is able to continue to develop and maintain sufficient resources to ensure adequate sources of electricity has emerged as perhaps the greatest challenge the industry faces," said Laurence D. Kirsch, one of the study's authors.
Traditionally regulated utilities can "continue to meet resource adequacy requirements," while the competitive utilities are in markets that are "still trying to prove the workability of their model for assuring resource adequacy," the report found. "As a result, any debate on resource adequacy should begin by asking how to make the restructured market-model work."
Regulated utilities have prices set by state regulators, which guarantees a certain level of profit and stability, enabling otherwise risky investments in new generation and making the traditionally-regulated utility more reliable.