Cape Wind unexpectedly creates a new avenue for free markets

The recent agreement between Cape Wind and National Grid for electricity purchase at a price of 18.7 cents per kilowatt hour has been criticized as excessive.  This is odd given that it has been established by a willing buyer and a willing seller.  This pricing is being compared against a market where electricity prices fluctuate according to current fuel prices and there are no mechanisms for the end user to obtain electricity at a predictable cost over a period of time.

What would happen if the PUC required that utilities provide a 20 year contract option where fluctuations in fuel price could not be passed through to the consumer.  This would require that utility to monetize the risk of fuel price fluctuation, and incur the risk associated with fluctuating fuel prices.  The utility would not be regulated as to the price it charged for these contracts, it only would be required to offer them.  This would create a fair market where one of the substantial values of renewable energy – predictable costs – would be monetized.  There are many that say, renewables must fend for themselves in the marketplace.  Well lets start with a marketplace that is not rigged to favor traditional energy sources.

Copyright Clayton Handleman, All rights reserved 2011

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