In 2023 thus far, right of first refusal (ROFR) bills have been introduced in six state legislatures. These pieces of legislation aim to give utilities priority in building, owning, and operating transmission lines, eliminating competitive bidding among energy companies over new projects. Yet the competition these bills are designed to prevent is essential for businesses and consumers alike to thrive in the energy sector.
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A truly free energy market is a maximally cost-effective one. Competitive transmission processes are linked to a 20-30% cost reduction of new projects. Additionally, if competition were expanded to one-third of transmission investments, customer cost savings would total $6-9 billion over only five years. From the late 1990s to the late 2010s, investments grew by approximately 900%. As federal policies and private sector interest generate greater investments in U.S. transmission, these benefits will only become more significant.
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Pricey projects, however, benefit utilities. Whereas private companies’ bottom lines suffer from higher costs, utilities’ bottom lines grow as projects become more expensive. As utilities spend more money, they make more money by profiting off of the assets they invest in to deliver energy, rather than the energy they are selling itself. This business model, coupled with anti-competition laws like ROFR, leads to projects being drawn out over time, leading to more expensive and less reliable energy for consumers.
Giving utilities an upper hand in transmission development doesn’t just hurt customers’ pockets, though, it also stands in the way of critical energy innovation. Allowing utilities to effectively monopolize transmission projects through right of first refusal laws means they no longer have to respond to market pressure for modernized energy approaches. Without any sort of risk of losing customers (customers no longer have a choice in who is supplying their electricity), utilities will have no incentive to respond to consumer demands such as sourcing power from renewables or pursuing decarbonization strategies.
Meanwhile, clean energy innovation is taking place all across the private sector and in competitive electricity markets. Span, for instance, is a company integrating redesigned solar panel technology with mobile controls to provide more reliable, efficient solar power to consumers. In a similar vein, Stem is employing smart technology to digitally connect an expansive network of batteries to efficiently store energy. This system is already helping Californians avoid blackouts when energy demand skyrockets during unprecedented heat waves and has aided in stabilizing East Coast grids in the face of dramatic temperature spikes. Truck rental company Penske has already cut its peak energy consumption while charging electric vehicles by 40% with Stem’s technology.
Transmission infrastructure is no exception to this trend. Ivenergy, a private clean energy enterprise, is developing green transmission projects both on its own and through partnerships with other energy developers. The company is already responsible for 190 envelope-pushing wind, solar, and natural gas production, storage, and transmission projects across the country and around the world, working to optimize both the efficiency and sustainability of energy transport and usage.
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The fact that many of these innovative energy companies are experiencing tremendous growth (Stem grew its revenue by 250% from 2020 to 2021) reflects significant market demand for consistent, powerful renewables. Evidently, then, right of first refusal laws not only box critically boundary-pushing private companies out of transmission projects, but also consumers and their will regarding decisions made about their own energy. The ROFR bills currently being debated across the country are a danger to energy affordability, reliability, and innovation.
Nadia Suben is the leader of the American Conservation Coalition’s New York City branch, as well as the founder of the organization’s Conservatives for Clean Cities initiative.
The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.