Our electric regulatory model is broken. It preferentially deploys expensive power sources before cheap ones. It compares the variable costs of dirty fuels to the all-in costs of clean fuels and deludes itself into thinking that the dirty, expensive power is economically advantaged. It places the interests of utility shareholders above the interests of other potential investors in our power grid, massively skewing capital allocation, even while it insulates utility investors from the disciplines imposed by a competitive market.
These problems arise fundamentally from the over-regulation of our electric sector, which has created stable utilities, but virtually no opportunities for the kind of economic "upside" necessary to attract entrepreneurs into the sector. This ought to be good news; after all, we Americans are really good at taking risks, deploying our prodigious entrepreneurial talents and making big financial bets. The problems we face all play to our strengths. Unfortunately, any positive change to our system is by definition deregulatory -- a word that has been politically poisoned by the botched restructuring (don't call it dereg!) in California and Enron's machinations. As factually irrelevant as those bogeymen may be to any discussion of deregulation, they present formidable political obstacles to reform -- and only the most quixotic windmill-tilter chases reforms that are politically untenable to both sides of the aisle.
Houston, we have a solution.