Why risk and reliability matter more than fuel diversity
This policy brief examines the conceptual basis for supply diversity as a policy objective; diagnoses ongoing economic and political trends relevant to the subject; and reaches conclusions through the lens of policy analysis. Over the past 15 years, the nationwide trend actually has been toward greater fuel diversity. There is little empirical evidence to support the claimed association between supply diversity and electricity-market performance. The record shows that policy interventions to promote greater diversity typically undermine market performance. If policymakers want to improve electricity market performance, they should instead support targeted reforms that provide proper incentives for risk management and reliability, which commonly are associated with supply diversity.
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