When people flip their light switch, they expect the lights to turn on. That forms one bound of the Overton Window for electricity regulation. The window has been shifting in recent years because people also want electricity generation to emit less carbon dioxide. I discuss this with my colleague Jason Hayes, the Mackinac Center’s Director of Environmental Policy, for this week’s Overton Window podcast.
Electricity is regulated at the federal, the state level, and even the international level. Regulations are intended to prevent utilities from overcharging households and to ensure that people get reliable electricity. It’s expensive to build power plants and maintain the electricity grid, so lawmakers worry that a lack of competition or duplication of efforts would result in too much pricing power to the utilities.
“There’s a multilayer approach to all of this,” Hayes says. “Up to a certain point it has worked well over the past several decades, but it’s complex and there’s a lot going on there.”
Many people are worried about climate change, and this interest has changed electricity policy. Coal and gas power plants are a major source of carbon emissions, and advocates want to transition to carbonless power generation like wind turbines and solar farms. Their efforts are causing a foreseeable but unintended reduction in the reliability of electricity.
“The wind doesn’t blow 24/7 and the sun does not shine 24/7. They are not being penalized for their inability to be dispatchable,” Hayes says. That is, other forms of electricity generation have to take up the slack when the weather is not conducive to wind and solar.
Texas had a terrible experience with this in 2021 when winter storm Uri knocked out power and wind couldn’t be used to replace the lost generation. “They actually came within minutes of having a much larger system failure where they would have to basically go back to square one to restart the system,” Hayes says. “That would have taken weeks.”
Government payments to encourage wind and solar production have altered the calculus regulators use to provide cheap energy. “So when you allow those disruptions in market pricing mechanisms to take over, you force unreliable sources that are only artificially inexpensive due selective tax preferences," Hayes says. “That’s a problem, however, because unreliable sources impose heavy costs on the entire system. And, as utilities begin to use more wind and solar, those costs are becoming more evident as our entire electric grid becomes less stable.”
That in turn ruins the economics for more reliable forms of emissions-free energy. “The ability of renewables to price below the cost of production — it’s actually a term in the industry called negative pricing — makes it too expensive to keep the nuclear plants running,” Hayes says.
The Overton Window on electricity policy is set by popularity. Although the expectation of reliability is still one of the boundaries, the popularity of decarbonization in influential circles has changed what is politically possible. “You saw the Overton Window shift a little bit when people said that climate change was our biggest problem, and we have to address climate change,” Hayes says.
He notes that the drive for decarbonization is coming not just from the public, but from a lot of powerful interests. “Not only utilities, but big business, and you see investment companies like Blackrock and others that are driving a lot of the investments that are associated with this sort of thing,” Hayes says.
He thinks that this friction between decarbonization and reliability may make nuclear electricity generation more feasible. “Nuclear ticks every one of the boxes off of the list. It’s completely reliable. It’s affordable once it’s built. It has no emissions associated with it, so our CO2 issue is dealt with,” Hayes says.
“I think it’s far more important for all of the various levels of government and oversight and regulatory bodies to begin focusing on reliability,” Hayes says, “We should get rid of renewable portfolio standards — this idea that you have to have a minimum percentage of your electricity come from wind and solar and other renewables — it should be on reliability.”
He’s trying to put this into practice. Hayes has participated in the regulatory intervention process, trying to keep a utility from decommissioning some of its coal plants so soon. He was unsuccessful in his attempt.
He’s also trying to get the word out about the importance of reliability by writing editorials as well as talking to journalists and legislators. Because if he can make reliability more popular, lawmakers and utilities can move to carbon-free electricity generation and still make sure that the lights turn on when people flip the switch.
Check out the conversation at the Overton Window podcast.
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