Competition is the Key to a Better Electricity System
“RTO/ISOs have exhibited strong reliability performance and provide incentives for market participants to engage in reliable behavior. The open-access organized market model is better positioned to reduce barriers to entry, lower transactions costs, provide clear investment signals to investors that spur innovation and compensate resources fairly and efficiently in a manner consistent with market fundamentals,” writes Hartman.
Despite their successes, current organized markets can improve in several important areas, including reducing artificial barriers to entry and exit to bolster competition, remedying incomplete markets in which various ancillary services are not accurately valued and minimizing price distortions within markets.
Ultimately, some level of government involvement is necessary in order to maintain competition and avoid repeated market failures. But ultimately, electricity markets that operate freely – namely, organized electricity markets – have demonstrated the best results.
“Competition is the driving force behind a more efficient, advanced electricity system,” Hartman concludes. “Proactive market design and competitive transmission planning reforms will efficiently accelerate the deployment of advanced technology and signal investments in innovation. Policymakers must remain disciplined and only support reforms consistent with well-functioning electricity markets.”