How Supply Side Energy is Lowering Rates for Americans
Story by Noah Botwinick, contributing author for the PeoplePlanetProfitBlog.com.
Brief History of Supply Side Energy in America:
During the early 20th century in the US, the market of energy suppliers was dominated by a few large companies. This system essentially had the characteristics of a monopoly; the energy companies could charge whatever prices they wanted and if you wanted energy, you had to comply with their demands. In this system, energy companies had no pressing incentive to develop more efficient energy transmission technologies. In the middle of the 20th century, this system became largely federal and state-government regulated, so again, you didn’t really have much of a choice as to who was supplying you with your energy needs. It wasn’t until the 1990s that the energy market was largely deregulated, paving the way for independent companies to begin supplying energy to Americans.
The opening up of the supply-side of energy to independent businesses re-introduced competition into the market, as energy companies fought with one another for customers. Since customers could now choose who supplied them with electricity and natural gas, these supply companies began looking for ways to lower their prices so as to attract customers, as in any business. The way these companies sought and are seeking to supply and transmit their energy to their customers at a cheaper rate is by looking to become more energy efficient in their energy generation and transmission.
Energy Efficiency in Producing Energy
Becoming energy efficient is important for any company or business, but it is particularly critical if your business involves the production and transmission of energy. Energy production is the process of making the electricity itself, and energy transmission refers to bringing that electricity to the user in a form that the user can use. Thus, becoming more energy efficient in the supply-side of electricity means to waste less energy in the production of energy and to waste less energy in bringing that energy to the consumer. Competition within this market has led to the utilization of certain technologies that can cut down on the amount of energy lost, specifically through the uses of renewable energy and green products.
Additionally, in the early systems of the electric power industry, electricity had a relatively low voltage and thus couldn’t be transmitted very far away from the electrical power plant. Thus, even if someone developed a more efficient way of producing power and was offering customers electricity at a cheaper rate, only the people living within a close vicinity of that power plant could reap the benefits of this cheaper power. Now, however, due to newer technologies such as steam turbines, power can be transmitted to customers that are much farther away. Therefore, independent energy companies can develop ways of producing electricity more efficiently and can offer this product to customers across the country.
These power companies that produce and transmit electricity more efficiently are also able to so easily provide power to customers at a cheaper rate because of existing delivery methods. Such delivery methods generally consist of medium-voltage power lines, substations, pole-mounted transformers and low voltage distribution wiring. Using the same power lines that currently provide electricity to homes and businesses, energy companies can provide power from their more energy efficient plants to any home or business without having to build new delivery methods. It’s like if you added a more efficient central heating system into your home to replace the existing heat source, the heat would still flow through your house through the same heating system; the only difference would be that the heat itself now costs less. This is the concept behind changing energy providers; it is simply reducing the cost of the energy you pay for without changing anything else.
Changes in Energy Production Methods: Renewable Energy
Traditional energy supplies come from non-renewable energy sources. Non-renewable energy is energy that is taken from sources that are of finite quality and will, at some point in the near future, run out. Energy that comes from non-renewable energy sources has detrimental environmental effects and contributes to global warming, according to most scientists. This form of energy, which comes from fossil fuels, natural gas, oil and coal, cannot be regenerated within a short period of time. Also, because fossil fuels are limited and are becoming rapidly depleted, prices for fossil fuels are always on the rise. Unfortunately, fossil fuels also have benefits as an energy source, and that’s why they are used so prevalently as energy sources around the globe. Non-renewable energy sources can produce energy cheaply, and fossil fuels can also generate large amounts of electricity. Additionally, they are readily available for use and can be converted to energy relatively simply. Nonetheless, if we continue to rely solely on non-renewable energy sources for our energy, there will be significant negative effects on the global environment, not to mention that if we continue to do so we will run out of these finite sources in less than 100 years, according to many scientists.
Luckily, many are now looking to another source of energy. Today, roughly 16% of the earth’s energy comes from renewable energy sources.
Roughly 16% of the earth’s energy comes from renewable energy sources.
Renewable energy is energy that comes from natural resources, such as sunlight, wind, rain, tides, and geothermal heat. The reason it’s called renewable is because energy that comes from these sources can be produced over and over. There are many benefits of using renewable energy. First of all, they are plentiful; in other words, they come from sources that don’t run out. They are also the cleanest form of energy, in that, unlike energy derived from coal or oil, energy derived from these sources has low carbon emissions and doesn’t pollute the atmosphere. Another benefit of using renewable energy sources to provide energy is that they are available in every country; thus, the US wouldn’t have to rely on third-party countries for oil and could avoid price hikes, oil embargoes and being coerced by other countries that we rely on for oil. Renewable energy sources will be cheaper in the long run as traditional sources of energy begin to run out and prices skyrocket. Forms of renewable energy include wind power, hydro-electric power, solar energy, biomass, geothermal energy, tidal energy and nuclear energy.
Solar Panels at a Solar Energy Plant, used to generate clean energy
What are the Economic Benefits of Supply Side Energy?
Asides from the environmental, health and political benefits of using renewable energy sources, there are significant economic benefits in switching energy suppliers. By switching energy suppliers, all you’re doing is switching who pumps the electricity into the wires that are already connected to your house. The only cost you’re paying is simply for the electricity itself. Therefore, if energy suppliers can produce the energy at cheaper cost than companies that rely on non-renewable sources of energy, the consumer can benefit from this lower cost simply by switching energy companies. When picking what energy supplier to use, it’s important to understand how they produce their energy. This is because renewable energy has many benefits, both for the individual, the state and for the earth. Here are some reasons highlighting the importance of where we get our energy from.
- Generally, switching your home to an energy company that relies on renewable sources of energy can result in savings of just over one cent per kilowatt per hour. Doesn’t sound like a lot; however, considering that according to the department of energy the average household in the US uses approximately 10,656 kilowatt-hours per year according to the Department of Energy, these savings can amount to significant amounts, especially for a business, especially because they require no changes in quality of the product and only require enough effort to make a phone-call.
- Also, while energy companies that get their energy from non-renewable sources will have to raise their prices as energy sources become depleted in the future, customers who receive their energy from non-renewable energy-source generators can enjoy fewer fluctuations in price. Additionally, because energy from renewable energy sources isn’t based on a finite resource, the pricing is much less susceptible to increased demand, decreased supply or other standard market fluctuations. Not only that, but because renewable energy sources are everywhere, the pricing of this energy is also not affected by control or supply disruptions in external locations.
- Another economic benefit of renewable energy is that because some of these technologies, such as solar power units, can be placed in or near the building that is using the energy itself, it can cut down on transmission costs. It can also cut down on the amount of power lines required in a neighborhood, and allows existing power lines to last longer because their load can be reduced. It also cuts down on the amount of power lost through transmission.
- Building local renewable energy plants and new clean energy-based facilities also creates new jobs in the US and sparks economic development in areas where these plants are being built. They employ local construction crews, deal with local banks and hire local workers. It also helps farmers and other landowners, because energy producers often pay to utilize their land for wind turbines and other forms of renewable energy production. Renewable energy production plants also contribute significant amounts of taxes to their regional governments.
Other Benefits of Supply Side Energy:
- Increased fuel diversity by relying on alternate sources of energy
- Transmission reliability from distributed generation, which allows collection of energy from many sources and has less negative environmental impacts as well as improved security of the energy supply.
- Avoided future investment in fossil-fuel generating capacity
- Reduced price of wholesale electricity
- Reduced price volatility by relying on alternative sources of fuel, so that a disruption in one energy resource does not significantly raise the price of electricity
- Reduced fossil-fuel prices from more competition in the energy market
- Reduced transmission congestion and losses, which is when there is a shortage of transmission capacity to supply the waiting energy-users, because the supply side energy industry is building new energy generation plants
How Clean Distributed Generation can Save Money:
Distributed generation refers to power generation at the area where the energy is being used, as opposed to at the area of generation. By generating power at the location itself that is using the energy, it saves on transmission costs, complexity, interdependencies, and inefficiencies that come with electricity distribution. Generally, distributed generation utilizes combustion generators, which is an unclean method of generating energy. There are systems of distributed energy distribution, such as harnessing energy from solid oxide fuel cells, which can produce clean energy around the clock at a low cost, and save money over the long run.
What are Supply Side Clean Energy Policies?
Supply-side clean energy policies and programs affect the nature of the usable energy that is generated from the energy generators. In other words, they alter the composition of energy resources or change the operational characteristics of the energy supply system. Supply-side policy measures generally support the development of utility-scale renewable energy and combined heat and power applications, as well as clean distributed generation.
What are the Economic Benefits of Supply Side Energy Policies?
The direct effects of supply-side initiatives are the costs of manufacturing, installing and operating the renewable energy or combined heat and power equipment supported by the initiative, as well as the energy savings and possible reduced energy supply costs from fuel substitution among entities participating in the supply-side program and their customers. (Combined heat and power generation, other known as cogeneration, is the use of a heat engine or a power station to generate both electricity and useful heat at the same time.) The direct costs and savings of renewable energy, combined heat and power and distributed generated initiatives include displacement savings and waste heat saving. Displacement savings refers to money saved by utilities from the displacement of traditional generation, such as reduced purchases of fossil fuels as well as decreased operation and maintenance costs from energy generation resources, while waste heat savings is the money saved by utilities or other businesses using waste heat in combined heat and power applications for both heating and cooling purposes.
About Noah Botwinick
Currently attending Yeshiva University in New York. Majoring in political science. I’m passionate about protecting the environment and the world we live in. I believe that sustainable, clean and efficient energy practices hold the key to reversing the damaging effects we’ve had on the earth. In addition, I played on my college basketball team for 2 years and I’m the editor in chief of the YU yearbook.
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