KEMA white paper finds competitive electricity markets spur innovation

March 4, 2011 | 00:00

KEMA white paper finds competitive electricity markets spur innovation

According to new research from KEMA, competitive electricity markets around the United States have promoted and accelerated innovation and will likely continue to foster future innovation.

Commissioned by the COMPETE Coalition, the white paper, “Innovation in Competitive Energy Markets", was issued during a Capitol Hill briefing in Washington, D.C. on February 24, 2011. The briefing featured keynote remarks by the Honorable Patricia Hoffman, Department of Energy Assistant Secretary for the Office of Electricity Delivery and Energy Reliability, and a panel discussion with Viridity Senior Vice President of External Affairs Allen Freifeld; Beacon Power Corporation Director of Corporate Communications Gene Hunt; KEMA Senior Vice President for Innovation Ralph Masiello; and former FERC Commissioner and COMPETE Coalition counsel William Massey.

KEMA’s white paper draws on three in-depth case studies in the North American wholesale and retail electricity markets over the last decade. These case studies illustrate that competition in electricity markets has actively created and accelerated innovative electricity service offerings and practices. Competitive markets are can drive innovation by rewarding new ways of delivering power and encouraging participants to develop services that quickly adapt to meet customer needs.

In recent years, many wholesale electricity markets have evolved to allow demand response resources to provide grid services typically provided by generation assets.  For example, in New York, curtailment service providers increased their share of demand response resources from 44 to 77 percent between 2003 and 2008. In New England, curtailment service providers attracted more than 70 percent of new DR resources for 2008.

According to the white paper, three primary elements of competitive electricity markets accelerate innovation:

Fair Market Rules:  Market rules structured to allow suppliers to compete in meeting target customer needs, regardless of participating technology, empower suppliers to offer innovative services.  Continual adaptation is therefore crucial for encouraging novel technologies and service offerings.

Accessibility:  Low barriers to market entry encourage new participants to offer innovative products and services, and a level competitive playing field incentivizes both new and existing participants to continually respond to customer needs.

Risk/Reward:  In return for the potential to earn a profit, suppliers are willing to take risks in developing and offering new products.

The “Innovation in Competitive Energy Markets” white paper is available for download after registration, see here.

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