Page 42 - Sustainable Cities and Communities Design Handbook

The Green Industrial Revolution Chapter j 2 19

While energy efficiency is a first and important step, complete energy
independence is within our technological grasp. A third generation of
renewable technologies is coming and it is much betterdlighter, thinner,
stronger, and cheaper. Wind and solar power, coupled with highly efficient
storage devices, smart grids, and local distribution systems are coming
together (see Appendix D for a graphic example). These independent power
systems need to be integrated. What is lacking is the large national financing
and political leadership to make the commitment and push America past the
threshold into the GIR. Sustainable development as a key component in the
GIR, like its predecessor, depends on this leadership and financial support.

DEREGULATION BENEFITS: MYTHS ABOUT ECONOMIC
EFFICIENCY AS CONSERVATION IS NEEDED TOO
The key issue for the economics of utility deregulation is that there be
opportunities for market response that will increase production efficiency and
reduce prices to consumersdin short, keep the neoclassical balance between
production and demand. There are many economic arguments that became
articles of faith supporting the premise that benefits would follow from
deregulation and more competition in electricity. For the most part economists
did not follow their own early warnings that it would be complex and difficult
to actually deregulate the electricity sector. Instead, over the subsequent years
economists started to believe that they could actually deregulate and that
benefits would follow.
The following list of benefits are derived from Joskow’s (2000, p. 119e24)
examination of deregulation in the late 1990s in California and other states,
though the article was written before the economic collapse in California.
Joskow notes that in spite of general efficient operation of the electrical system
and the comparative success of American efforts compared to those in most
other countries, the pressures for deregulation increase. There are several
reasons, with our analysis of each one.

Better Investment Decisions

First, deregulation in the long run will provide better guidance in deciding
what generation plants to build and will exert pressures to control construction
costs. The largest costs in the utility industry are in capital expenditures, and
this fixed long-term investment is around half of the cost of generation of
power. However, the cost of generation even with the same fuel and size of
plant varies widely across regions of the nation and world, and the risk of bad
decisions needs to be placed on the suppliers of these generation services. For
economists this is a fundamental variable in all industries, where efficient
capital investment provides competitive advantages. Can competition induce
better investment decisions?