UCLA Law Review Volume 61, Issue 6

Public Utility and the Low-Carbon Future

Substantial reductions in global power sector emissions will be needed by midcentury to avoid significant disruption of the climate system. Achieving these reductions will require greatly increased levels of financing, technological innovation, and policy reform. In the United States, the scale and complexity of the overall challenge have raised important questions regarding prevailing regulatory and business models, with much scrutiny directed at the traditional practice of public utility regulation. Recognizing the many valid criticisms leveled against public utility regulation and the important questions raised about the viability of traditional utility business models, particularly in the face of substantial growth in distributed energy resources, this Article argues that a revitalized and expanded notion of public utility has a critical role to play in efforts to decarbonize the power sector in the United States.

In making this argument, the Article looks back to an earlier, more expansive concept of public utility as articulated by Progressives, legal realists, and institutional economists in the early twentieth century. This earlier concept of public utility contains valuable insights for dealing with the current challenges of decarbonization. The Article shows how this broader concept of public utility was substantially diminished by a confluence of external challenges and a sustained intellectual assault mounted by economists and lawyers starting in the 1960s. The narrowed understanding of public utility that resulted, it is argued, has distorted our views regarding the role of markets and disruptive technologies in the sector. In fact, basic public utility principles continue to govern a significant amount of activity across the power sector, including in both wholesale and retail electricity markets. And there are important unrealized possibilities embedded within the public utility concept that hold considerable promise for reforming current regulatory and business models in the face of rapid technological change and growing decarbonization imperatives.

Such principles and possibilities are particularly important in ongoing efforts to increase renewable energy and finance large low-carbon generation projects. They also hold great promise for ongoing efforts to plan for and optimize the integration of increasingly large amounts of distributed energy resources such as rooftop solar, demand response, and energy storage. Indeed, when one looks at the overall scale, complexity, and sequencing of investments needed to decarbonize the power sector over the coming decades (however it comes to be organized), it is clear that the broad concept of public utility offers essential tools for planning and coordinating such investments over the long time horizons contemplated and for managing a system of increasing complexity. In all of these areas, a more expansive notion of public utility that draws from earlier understandings of the concept provides a normative foundation for efforts to govern a power system that is increasingly complex, participatory, and intelligent, and for managing the sustained, collective effort to channel investment and behavior in a manner necessary to realize a low-carbon future.

An Open Access Distribution Tariff: Removing Barriers to Innovation on the Smart Grid

This Article proposes that the Federal Energy Regulatory Commission (FERC) consider promulgating an Open Access Distribution Tariff (OADT) to open the nation’s electric grid to new products and services at the consumer (distribution) level. Design of the OADT would be comparable to the Open Access Transmission Tariff that the FERC has used previously to open the nation’s transmission wires. This Article argues that an OADT is necessary to create a smart electricity network that would be national, multimodal, and interactive. There is no smart electricity network at present, and there are numerous barriers to the development of open networking, such as obstacles to open access, lack of consumer demand for such a network and its products, resistance of incumbent utilities, and a variety of other factors. An open access principle will likely be necessary, but the timing of such regulation is of critical importance. This Article argues that regulatory establishment of an open access principle will eventually be necessary—and to assess when open access might be desirable, this Article examines the revolutionary transformations that took place in three regulated industries: telecommunications, electricity restructuring, and finance.

This Article examines key near-term and long-term questions involving an OADT’s timing and development by analyzing these regulated industries using three criteria: (1) signifiers of when a transition would be necessary and conditions that might make open access more desirable to industry actors, (2) regulatory prerequisites necessary in the near term, and (3) risks involved in drawing lessons from the specific regulatory transformation (including federalism concerns). This Article concludes that rather than waiting for an organic transformation of the electric grid and evolution of open networking, a deliberate path of preparatory work will best set the foundation for open access.

Valuing National Security: Climate Change, the Military, and Society

This Article proposes a hypothesis: By linking a reduction in reliance on fossil fuels to the value of promoting national security, what I have called the Military-Environmental Complex has the potential to change individual attitudes and beliefs, and therefore behavior and political debate, about energy use and climate change. Studies have shown that individuals with certain values or political ideologies are less likely to believe in the existence of scientific consensus about climate change, have positive attitudes toward addressing climate change as an urgent policy matter, and behave in ways that reduce energy use. Connecting climate change to national security risks and reduced fossil fuel use to strengthening the military can affect these individuals’ attitudes, beliefs, and behavior in these arenas. In particular, two aspects of the Military-Environmental Complex can serve as potential drivers of change: first, the military’s role as an unequivocal validator of climate science, and, second, its current efforts to value the true costs and benefits to its mission of energy conservation and increased use of renewables. Although not necessarily its goal, the Military-Environmental Complex thus has the potential to unleash important spillover effects in the sphere of values, behavior, and policy.

Lessons From the Past for Assessing Energy Technologies for the Future

Addressing climate change will require the successful development and implementation of new energy technologies. Such technologies can, however, pose novel and uncertain hazards. Furthermore, the process of energy innovation is technically difficult and occurs in the face of powerful forces hostile to new technologies that disrupt existing energy systems. In short, energy innovation is difficult and hazardous, but essential. This Article presents case studies of three existing energy technologies to obtain insights in anticipating technological change, managing uncertain hazards, and designing appropriate laws and policies. The Article then applies these insights to a varied sample of emerging energy technologies. Ultimately, laws and policies should distinguish between new energy technologies according to (1) their state of readiness, (2) their potential to complement or disrupt existing energy infrastructures, and (3) the possible hazards associated with their full-scale deployment.

Complexity and Anticipatory Socio-Behavioral Assessment of Government Attempts to Induce Clean Technologies

Governments are increasingly resorting to technology mandates to force development and commercialization of socially-desirable technologies that the market, for various reasons, seems unable or unwilling to provide in a timely manner. This Article analyzes three recent examples of government-imposed technology mandates, including explicit or de facto government requirements for electric vehicles, digital TV, and non-incandescent light bulbs. The analysis demonstrates that while all three mandates were motivated by legitimate and worthy goals, all three mandates encountered controversy, delays, confusion, and at best partial success. Three major conclusions can be drawn from these three cases studies: (1) Technology mandates should be a last resort for government to induce beneficial technologies; (2) When government resorts to technology mandates it should do a better job of trying to anticipate the social, economic, and technological implications of the intended technology change; and (3) When government resorts to technology mandates it should put into place mechanisms for ongoing review and adjustment of technology mandates.

Feasibility of Flexible Technology Standards for Existing Coal-Fired Power Plants and Their Implications for New Technology Development

This Article explores the feasibility of adding flexibility to mandates for existing power plants in order to foster technology innovation and reduce compliance costs and emissions.

Under new and proposed EPA rules a significant portion of the coal-fired electricity generating capacity will require multi-billion dollar investments to retrofit and comply with emissions standards on SO2, NOx, PM, mercury, toxic metals, acid gases, coal combustion residuals, and cooling water intake rules. A number of plant owners may find preferable to replace these plants with new units that run with today’s low cost natural gas. Massive retrofit or replacement of the current coal-fired power generation fleet with today’s solutions will harm the conditions for research and development of path-breaking fossil-fired power generation technologies. This would not be a serious problem if the current retrofit and replacement technologies were in fact a solution to the many environmental externalities posed by the coal-fired power plants that are now candidates for expensive retrofitting or retirement. But the technologies available today are far from being a solution commensurate with the climate and environmental risks that fossil-fired generation poses in the United States and the world. This Article finds that a policy with a flexible compliance payment that allows investors to delay the decision of retrofitting or replacing and hence, maintains incentives for innovation in retrofit and new plant technologies, can outperform an inflexible mandate by reducing compliance costs and improving environmental performance.

Socio-Political Evaluation of Energy Deployment (SPEED): A Framework Applied to Smart Grid

Despite a growing sense of urgency to improve energy systems so as to reduce fossil-fuel dependency, energy system change has been slow, uncertain, and geographically diverse. Interestingly, this regionally heterogeneous evolution of energy system change is not merely a consequence of technological limitations, but also and importantly a product of complex socio-political factors influencing the deployment of new energy technologies. The socio-political context for energy deployment differs on national, state, and even local levels, making cross-jurisdictional analysis of energy systems challenging. At the same time, understanding how social, legal, cultural, and political factors influence energy deployment across multiple jurisdictions is critical to developing effective policies for reducing fossil-fuel dependency.

In response to such challenges, in 2008 we developed the Socio-Political Evaluation of Energy Deployment (SPEED) framework. SPEED is an interdisciplinary framework for analyzing how technological, social, and political conditions influence the development and deployment of specific energy technologies. SPEED has been applied to compare regional disparities in the deployment of multiple specific technologies. This Article illustrates how an enhanced version of the original SPEED framework can be used to characterize the socio-political factors influencing the development of energy systems across multiple regions. First, we describe the value of SPEED analysis in characterizing interactions among multiple factors—including cultural, political, environmental, legal, technical, and economic influences—that shape energy technology deployment and drive system change. Then, using smart grid development as an example of a system-wide energy initiative, we describe how the application of SPEED analysis could improve policy and regulatory effectiveness.

Energy and Climate Change: A Climate Prediction Market

Much of energy policy is driven by concerns about climate change. Views about the importance of carbon emissions affect debates on topics ranging from the regulation of electricity generation and transmission to the need for incentives to develop emerging technologies. Government efforts to fund and communicate climate science have been extraordinary, but recent polling suggests that roughly half of the American population is unsure or does not believe that anthropogenic climate change is occurring. Among some populations, belief in climate change is declining even as the climate science becomes more certain. Much of the doubt occurs among individuals who support free markets, and the doubt is fueled by the argument that governments and government-funded climate scientists are not accounting for information that is inconsistent with the climate consensus. This Article explores a private governance response: the creation of a prediction market to assess and communicate the implications of climate science. Markets not only allow the buying and selling of goods, but also provide information about the likelihood of future events. Research suggests that markets are often able to account for information that is outside of the conventional wisdom. In addition, individuals who are likely to doubt climate science may find markets to be credible sources of information. A climate market could take the form of an academic initiative along the lines of the Iowa presidential prediction market or could operate as a more traditional options market. Trading could occur over the types of predictions that matter for global climate change, such as the global average temperature or sea level in 2020 or 2100, with the current market value of the prediction signaling the likelihood of the outcome. The market will be subject to manipulation concerns, but experience with other prediction markets suggests that a climate prediction market could provide an accurate, credible, and widely disseminated signal about the status of the climate science.

Regulating Domestic Carbon Outsourcing: The Case of China and Climate Change

The vast majority of the growth in greenhouse gas emissions in the coming decades is expected to come from outside of the developed world. Yet on the whole, scholars have made only modest headway in identifying the distinctive features of effective environmental regulation in the developing world. This Article argues that a particular feature of the emerging economies—sharp regional economic disparities—need not be a barrier to climate change regulation. Instead, these disparities can be harnessed to make climate change regulation more effective. Taking China as its focus, this Article notes that both international law and Chinese domestic regulation have attempted to manage economic disparities according to the principle of common but differentiated responsibilities (CBDR). Building on these examples, it proposes a domestic CBDR approach for confronting China’s climate change risks. Such an approach includes more stringent mitigation obligations for China’s developed coastal provinces to the east, coupled with fiscal and technical support for developing provinces in China’s interior. This Article contends that features of the Chinese sociopolitical context offer advantages in policy development and implementation that render a domestic CBDR approach more likely to succeed than its international counterpart. These advantages include normative legitimacy and confluence with other domestic policy objectives, in particular. Interest group influence and institutional capacity factors offer potential benefits, but also serious challenges. In the end, this Article aims to achieve two main goals: to highlight the importance of differentiated regulation in China’s existing regulatory regime, and to argue that more extensive use of the approach can benefit policy formation and on-the-ground implementation alike.

Smart Meters, Smarter Regulation: Balancing Privacy and Innovation in the Electric Grid

Transitioning from our current energy infrastructure to a smart grid will be essential to meeting future challenges. One key component of the smart grid is advanced metering infrastructure (AMI). AMI allows for the grid to be run more effectively and efficiently by making granular near real-time data about customers’ energy usage available. Coupled with the input and innovation of third-party companies and researchers, the potential benefits of this technology are immense.

But given the granularity of AMI data, some academics and consumer advocates are concerned that the technology could place customer privacy at risk. It is therefore essential that regulators appropriately tailor privacy protections to strike the proper balance between the innovative potential of AMI data and consumers’ privacy concerns. When possible, regulators should opt for regimes allowing for the protected sharing of granular AMI data with third parties.