A Telecom Act for Energy? The Case for a Big Bang

Earlier this year, NDN launched our Electricity 2.0 Initiative with the goal of jumpstarting interest in opening up the electricity network to new capital, ideas and participants. Our reason: Despite over $5 billion in cleantech investment last year and attention from the President to America's largest technology companies on down, the US is still losing the clean energy race.  Our commitment: reform the rules governing electricity to open up the electricy network, lest no renewable revolution occur in the United States.

Over the summer, support for our idea grew.  This summer Chairman Ed Markey--an energy pioneer who also oversaw the Telecom Act in the 1990s and understands the parallels with energy today--hosted an event on Electricity 2.0 at the capital.  Now in recent weeks, driven by the legislative and budgetary environment and a growing recognition that the US is falling behind in the clean energy race, support for Electricity 2.0 has approached a groundswell.  Department of Energy Undersecretary, Kristina Johnson speaking at the CTIA conference earlier in the emonth endorsed our call for America to upgrade to Electricity 2.0 if we are to experience a clean technology and renewable revolution.  This week, two longtime leaders on clean energy issues Ken Berlin and Bracken Hendricks endorsed the idea of a a Telecom Act for Energy. 

Why?  As we have been arguing and the Hendricks and Berlin explore in their article, we cannot ignore the financial and regulatory barriers blocking innovation in the electricity sector. Indeed, as I have argued, we cannot reasonably expect regulated monopolies--as created by current law governing the electricity sector--to lead a revolution.  And as Berlin and Hencricks explore, financial and other barriers are preventing needed investments n clean technology. 

The problem is straightorward.  Regulated utilities receive a fixed rate of return on all investment, be it paper clips or coal plants.  They receive no incremental reward for investing in new, riskier but potentially transformative technologies and may even be penalized if those technologies reduce usage.  At the same time, their cost of waiting is low.  Companies in a competitive environment have no choice but to innovate lest they fall behind as, indeed, we see wireless companies doing today as they invest billions in new network infrastructure.  In a monopolistic context,  by contrast, there is almost no penalty to standing pat.  Not surprisingly, R&D in the electricity sector is virtually nil.  Nor can one blame the utilities for their behavior which is entirely rational.  It is the system that drives behavior.   

With cap and trade tabled for the forseeable future and the federal budget in the red, we need to explore ways to unlock private capital and investment.  The key to putting private capital, people and ideas to work on clean energy is to remove barriers to financing create rules of the road that reward innovation.  In short, the time for a Big Bang or Telecom Act for Energy is now!

It bears mention by the way that the Telecom Act was passed under a Democratic President and Republican Congress with strong bipartisan cooperation.  That cooperation paved the way for an economic tsunami that viewed fifteen years later allowed US firms to dominate the Internet revolution creating millions of jobs in the US while empowering billions of people globally.

Stay tuned.