Does Competition Breed Innovation?

Steven Brown, editor in chief

I recently attended a conference in Washington D.C. where attendees debated the future of energy competition in North America.

To be perfectly honest, there really wasn’t a lot of debate going on at the conference. This was a decidedly pro-competition gathering, what one daily publication referred to as an “echo chamber” for deregulation proponents. The keynote speaker was from an organization whose slogan reads: “Electricity Competition IS the Public Interest,” and many of the conference’s panelists were from Texas, whose mostly successful foray into competition bears little resemblance to experiments anywhere else in North America.

To continue with the honesty trend, I’ll have to admit I’m not entirely sold on the idea that full wholesale and retail competition can work in the electric power industry. Fire away with your letters to the editor if your opinion runs contrary.

At this conference in D.C., several speakers mentioned that one of the real benefits of competition in any industry is a surge of innovative product offerings. This is pretty standard rhetoric among the pro-competition crowd, who like to point to telecom offerings like Call Waiting and Caller ID that apparently wouldn’t have come about had AT&T not been broken up into the Baby Bells.

Again, I’m skeptical. But, I’m also an inherently open-minded sort, and I will admit that the competitive providers in Texas make a compelling argument that a restructured, open power market is working there.

So, since the conference, I’ve been thinking a lot about competition in electric power, and that has colored my thinking as I’ve read about two “smart grid” projects at CenterPoint Energy and TXU.

CenterPoint Energy Houston Electric is following its 2005 broadband over power line pilot project with a deployment of “intelligent grid” technology. The deployment involves electric and gas AMR, remote connection/disconnection of electric service, and automated outage detection and restoration using the BPL network as the communications medium. CenterPoint Energy will deploy the technology this year in three separate areas of Houston.

Meanwhile, TXU Electric Delivery is working with Current Communications Group to turn its distribution network into what it’s calling the “nation’s first broadband-enabled smart grid.”

According to TXU: “Current will design, build and operate the BPL network covering the majority of the TXU Electric Delivery service area, including approximately 2 million homes and businesses in the Dallas-Fort Worth Metroplex and other Texas communities. This modernized grid will dramatically enhance TXU Electric Delivery’s ability to deliver top-decile electric service reliability and provide the potential for additional products and services from retail electric providers that will enable businesses and consumers to manage their electricity usage and costs.”

TXU says the BPL network will allow it to detect and restore outages more effectively and implement AMR more efficiently. Additionally, Current will use the network to deliver broadband and wireless services to homes and businesses served by TXU’s wires.

Is it coincidence that these two innovative smart grid/BPL projects are both going on in the only state that seems to be doing electric power competition correctly? Do I need to change my thinking on the subject of free-markets and power? Does competition truly breed innovation, or is innovation an inevitable consequence of human evolution (i.e., wouldn’t I have my Call Waiting, and wouldn’t Joe Customer in Dallas have his BPL, regardless of government-mandated competition)?

Drop me a line at stevenb@pennwell.com and let me know what you think.❮❮

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