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Free Market Electricity: A Primer

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Electricity is among the most-regulated sectors of the U.S. economy. A century of public-utility regulation of entry and rates has given way to new suites of government intervention. Wholesale electricity is centrally planned in most states, creating a contrived retail market. At the same time, government policies have increasingly displaced thermal generation (natural gas, oil, coal, and nuclear) with intermittent wind and solar power, requiring costly battery storage.

Today, a growing number of regions are subject to rising power rates, conservation appeals, and service interruptions. The Great Texas Blackout of February 2021 caused hundreds of deaths from a lack of heating and other services, not to mention a hundred billion dollars in damages. California, which in 2000–2001 suffered shortages that closed businesses and schools, endures “green” electricity rates at double the national average. Other states and regions are pursuing policies that portend similar results.

Economic discoordination can inconvenience, disrupt, and even kill. But this threat to reliable, affordable electricity is not the result of market failure but government failure, abetted by expert error from the knowledge problem and by politicization.

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