Deregulated Energy Markets

by Keith Heyde

Deregulated energy markets. Does it mean that you can steal your neighbor’s electricity with no repercussions? Not exactly. But energy market deregulation has been the single biggest ‘game changer’ in the productions and distributions of electricity since, well, the production and distribution of electricity.

 

But what is it?

 

In the olden days (and still in some states and countries around the world) energy was produced by one, well-monitored utility that distributed it to customers living within a certain utility reach. These customers had no choice about what electricity they bought and, although they could curtail their usage, they had no leverage for setting or dealing with the price.

 

Deregulation changed that.

 

With the breakup of England’s energy utility under Margaret Thatcher in the early 1990s, energy turned from a state-owned and operated utility into the hands of the private sector. This allowed for the concept of an Energy Market, as well as competition between private companies.

 

Energy deregulation subsequentially spread across the globe and has become common in many different areas. However, it should be noted that not all states are deregulated.

 

Deregulated offers a couple of advantages over regulated energy markets. These include generally lower prices, innovations that are oriented toward economic efficiency, and the decreased tax burden.

 

However, the downside of deregulation is that there is little incentive to innovate towards sustainable energy sources in a FULLY deregulated system. Simply, when economic efficiency is imperative to get the energy price as low as possible in order to win over customers, private utilities often opt for the cheapest electricity source available. This frequently means coal. To counter this, the government has established environmental and economic incentives to discourage cheap, dirty coal electricity.

 

Deregulation also has its downsides when manipulated. The famous California electricity crisis of 2000 and 2001 was an example of deregulation gone wrong.

To read more about the energy crisis check out here: http://www.pbs.org/wgbh/pages/frontline/shows/blackout/california/

 

It should be noted that energy markets can be deregulated and so too can gas markets. Many states and nations have separate electricity and gas systems with different deregulation rules. EnergyGridIQ is pleased to provide this information.

For the avid reader, check out this document on energy deregulation restructuring within the United States: http://www.cato.org/pubs/regulation/regv23n2/boren.pdf

 

For more information on energy market deregulation and what EnergyGridIQ can do to help you understand and take advantage of the system, please check out our projects page today.