A successful electricity marketplace is built on a market foundation that draws contributions from a full range of fuel types and from energy conservation priced at cost.
Conservation has an important role to play in the market, but we are missing the most important element of a successful conservation campaign. Until we as consumers are paying the true cost of power, we are missing the incentive to conserve.
|
“At the end of the day, passing on the true cost to customers is critical because it sends necessary signals, reminding us to conserve and make more prudent use of our resources.” |
From both an environmental and an economic perspective, subsidies are inefficient, and they lead to waste. Imagine what would happen to gasoline consumption if the price at the pump was subsidized by 20 per cent. Would consumption go down?
This is something Capital Power advocates for its power business.
The transition from below-cost utilities to true-cost utilities can be difficult – there are obviously political implications, as at the end of every wire is a voter, and the realities of the transition must be managed. It cannot be done overnight. But at the end of the day, passing on the true cost to customers is critical because it sends necessary signals, reminding us to conserve and make more prudent use of our resources.
It is also critical, because in all markets, price drives the development of new technologies and innovative processes. For example, the Cambridge Energy Research Associates have demonstrated that the rise in oil prices is stimulating new technologies – at $20 a barrel, producers focus on conventional oil; at $40 makes possible the commercialization of oilsands; $60 oil makes coal gasification and corn-based ethanol viable; and at $80, there is talk of bio-diesel and hydrogen being cost competitive.