The modern electricity grid is a weird thing. The delivery of electricity is a natural monopoly, for kind of obvious reasons. Despite that, we still attempt to shoehorn market-based mechanisms into the system. Many utilities are shareholder-owned, yet heavily regulated. In many markets around the country, producers of natural gas, wind, coal, nuclear, solar and so on, compete to sell their electricity into the grid. Now that we're looking for ways to decarbonize the grid, we're running headlong into complications and perverse outcomes of what we've built. 

“Now we have competition in generation, you have all these different independent power producers that are competing to sell electricity on the wholesale markets, and the wires—the transmission distribution—still tend to be owned by utilities. But they've also found ways to insert competition into the retail side, where consumers can have so-called choice over things,” says Matt Huber, professor of geography and the environment.

“And so what they've done is broken up this highly integrated and complex physical system called the grid and broken it up into parts where they can subject it to competion and markets and price signals,” Huber says. “Now this is where we reach this impasse where if we really want to totally restructure the grid, totally grow it in ways that can serve decarbonization, and AI...perhaps this sort of more integrated, more central planning, more coordinated and socialized investment model could be more useful than this very scattered and sort of fragmented system we have now,” he says.

Listen to the full interview on Bloomber's “Odd Lots”: “The Big Problem With the Modern Electricity Grid.”