By Ethan Blumenthal
Ethan Blumenthal is a post-doctoral scholar at the UNC School of Law’s Center for Climate, Energy, Environment, and Economics.
Energy Transitions and Rural Economies
What happens to a municipality when the local coal-fired power plant closes? Or nuclear facility? Conversely, what community impacts are there when a utility-scale solar field is installed; or new natural gas power plant begins operation nearby? Are the employment impacts permanent or merely illusory, the tax base substantively benefited or marginally impacted, what is being traded for new investment, what is lost when existing energy infrastructure is retired, and, ultimately, what can be done about it?
Last November, UNC Law’s Center for Climate, Energy, Environment, and Economics (CE3) hosted the Energy Transitions and Rural Economies Conference—taking a hard look at the legal options available to aid rural regions in mitigating harmful impacts and capturing community-wide benefits amidst unprecedented technological change.
As has been well documented, [i] the American energy sector is undergoing rapid change. From the drastic decline of coal to the increasing prevalence of natural gas and the rising importance of renewables, energy storage, and energy efficiency, changes are occurring at scale and throughout every level of the energy industry—challenging existing legal structures that were responsible for electrifying America in the twentieth century. The decision makers within these structures, often different from state to state, have in turn responded in different, at times divergent, ways.
Electricity Market Structures
To understand these “fixes,” one must first understand the U.S. energy market itself. Throughout the U.S. there are a diversity of electricity market structures. 23 states and the District of Columbia utilize varying forms of competition in either generation, energy retailing, or both, while the southern, central, and northwestern U.S. still largely use the traditional vertically-integrated model. [ii]
This diversity in approaches has resulted in a complex series of decisionmakers who differ in both identity and authority depending on one’s physical location, sometimes even changing from neighborhood to neighborhood. Customers, broadly speaking, may buy electricity from Investor-Owned Utilities, Electrical Cooperatives, or Municipal Utilities, though in traditionally regulated states the customer has no choice as each provider is assigned an exclusive service territory.
As potential solutions continue to be developed and energy markets continue to be reformed, it is imperative to consider the costs society asks rural communities to bear during this transition, and to continue to design innovative frameworks to address them.
The role of a state’s Public Utilities Commission, and the legal authority it may wield, vary widely between traditional and restructured markets. Regional Transmission Organizations play important roles as grid operators and conveners of disparate interests within the energy industry. The Federal Energy Regulatory Commission (FERC) regulates wholesale electrical (and natural gas) markets; however, it does not regulate any sales to end-users. Those are just a few of the key decision makers within the U.S. energy sector.
While these structures are complicated and at times archaic, this diversity has also allowed, to paraphrase Justice Brandeis, states to act as the “laboratories of democracy”—adopting novel approaches to address challenges large and small. Innovative considerations of utilities’ least-cost mandate may allow for the faster adoption of emergent technologies such as microgrids. Community Benefits Agreements can contractually bind developers to engage whole communities and ensure benefits flow past immediate landowners and the amorphous tax base. There are many innovative funding and financing solutions being developed throughout the U.S., addressing a wide range of issues.
As potential solutions continue to be developed, and energy markets continue to be reformed, it is imperative to consider the costs society asks rural communities to bear during this transition, and to continue to design innovative frameworks to address them.