How Can America Improve Its Energy Future?

Michael Liebreich: The cost of clean energy has dropped dramatically over the past three years. Wind projects can produce power for around 6¢ per kilowatt hour—lower than natural gas or new coal plants. Solar photovoltaic prices have fallen by 70 percent since 2008 and are now competitive without subsidies in many markets. Over the next decade, wind, mini-hydro, and geothermal power will drop an additional 25 percent. Yet progress toward a clean energy future in the U.S. is fitful because the sector is shackled by outdated regulations and perverse incentives. The U.S. needs energy policies that foster innovation rather than stifle it.

First, utility regulations need to be rewritten. New technologies enable competition in every area of electricity distribution, even the last-mile connection to the grid. Yet the sector today is like telecommunications in the 1980s: dominated by powerful incumbents arguing that change is too risky.