Electricity Markets and Energy Security: Friends or Foes?

Timothy Brennan

RFF Working Paper Series from Resources for the Future

Abstract: For a host of economic, geopolitical, and environmental reasons, the security of energy supplies has moved to the forefront of U.S. policy concerns. Here, I address the extent to which the U.S. electricity sector is affected by these factors and, in turn, whether increased electricity competition exacerbates them. After defining four dimensions of energy security that might pertain to electricity, I examine the role of global energy markets on that sector. Oil is currently used to generate only a small fraction of U.S. electricity supplies, although as recently as the late 1970s it generated about one-sixth of the total. Oil markets can affect electricity indirectly via substitution with natural gas. Competition in electricity markets should improve energy security by adding redundancy, but competition is threatened by unanticipated price increases, peak-load management, and risks associated with separating competitive generation from regulated transmission and distribution. Other complications include residential aversion to competition, residual market power, and the aspiration to reduce demand through conservation policies. The central security issue has been and remains the degree of conflict between competition and central control necessary to maintain reliability of the grid.

Keywords: electricity markets; electricity market restructuring; energy policy; energy security (search for similar items in EconPapers)
JEL-codes: L51 L94 Q48 (search for similar items in EconPapers)
Date: 2007-11-12
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
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Citations: View citations in EconPapers (3)

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