Power demand is surging. New data centers, factories and the electrification of the economy propel a thirst for electricity not seen in decades. Markets are responding but state and local governments have largely been caught off guard.
The state blueprint for power demand largely boils down to three approaches: reducing permitting and siting barriers, unleashing power competition and embracing regional cooperation. Unfortunately, some states are moving backwards on all three fronts.
All forms of power infrastructure, from power plants to power lines, face growing permitting and siting restrictions. Local ordinances are particularly troubling for wind and solar power, having increased 1,000 percent in the last decade. Permitting for natural gas plants was relatively easy last decade, but in recent years California, Illinois and the Northeastern states have made it all but impossible to build new gas plants, while forcing existing ones offline. Nuclear trends are positive, yet 12 states still restrict or prohibit siting. Permitting and siting of transmission lines — crucial connective tissue between power plants and consumers — has become more haphazard.
Even with smooth approvals, the two-thirds of states that cling to monopoly utilities for power generation and retail service are behind the eight ball. Competitive developers, where states allow them, have proven far quicker and more responsive to growing power customers and shifting supply fundamentals. They led the natural gas revolution last decade and now lead in approaches to meeting data center demand with renewable and nuclear energy, along with gas to fill the gaps.
Competitive suppliers provide more options at lower cost, while shouldering risk. By contrast, monopoly utilities socialize risk on captive ratepayers. Disturbingly, utilities are pushing legislation to re-monopolize competitive states including Ohio and Pennsylvania.
Texas stands as the most growth-ready, thanks to streamlined project approvals and the most competitive electricity market. Texas opted to isolate its grid from other states, which has the benefit of avoiding federal regulation but the disadvantage of leaving the state vulnerable to reliability threats from severe weather.
Electric competition involves participation in regional transmission organizations (RTOs). They are the air traffic controllers of the grid, who independently coordinate the operations of power plants and plan transmission expansion. States in the West and Southeast would be wise to join RTOs for their reliability benefits and cost savings. States already in RTOs should push reforms to improve accountability, efficient transmission development and expedited connection of new power plants to the grid.
Legislators must prioritize the customer voice above all. In monopoly states such as Louisiana, Oklahoma, Iowa, Wisconsin and Indiana, manufacturers and data centers want to choose their supplier with access to the regional market. Such liberty-enhancing reforms appeal to all political constituencies, because they catalyze lower costs and emissions and will juice America’s next industrial revolution.
