Industry Structure to Face Climate Change Challenge

Reference: Finding Opportunity in the Global Warming Challenge, by Jay Stein, Executive Vice President, Research, E Source.

The author has given very fresh perspectives showing the power industry competing with the oil and gas industry. My comments to the article Wind Integration: An Introduction to the State of the Art, by Sandy Smith, Communications Coordinator, Utility Wind Integration Group, can be found in the post Wind Integration: An Emerging Paradigm are closely related to his suggestions.

Two of the suggestions in the emerging paradigm are:

1) A carbon tax should be negotiated on a global setting, i.e. the World Trade Organization. Each country that does not apply the negotiated tax, will then free ride the global system.

2) Most of the discussions are indirectly supporting generation as a monopoly. Generation competition is not only possible, but absolutely necessary to go forward.

In response to Edward A. Reid, Jr., first issue with the statement on how to use the tax revenues, I suggest to use them to fund – through low interest loans - the development of the resources of the demand side (demand response, energy efficiency, energy storage, etc.) by means of competitive Second Generation Retailer - 2GR. As the power industry increases market share with CO2-free products, tax revenues decrease. So the tax will result a temporary device.

Once the USA adopts such a tax structure, global negociations to extend its range is a piece of cake, because the world in general is expecting something like that.

Wholesale competition is just a long run exersice. Retail competition with the development of 2GRs is what allows true short run competition. Both interact as a fully functional electricity market that will result one of the greatest opportunity to face the global warming or climate change challenge. That is the industry structure the power sector needs.