Could South Carolina become next hot spot for renewable development?
Related Documents:
SC HB 4940
SC Energy Freedom Act
Energy Innovation Southeast RTO Report
Energy Innovation Southeast RTO Policy Report
The South Carolina legislature is reconvening this week to finalize the state’s budget and consider bills that only passed a single chamber earlier this year ahead of the abrupt close during the early peak of the COVID-19 pandemic in the region.
While the legislature will be mainly focused on COVID-19-related items and finalizing the budget, there is also a bipartisan push for the senate to vote on HB 4940, a bill that could lay the groundwork for upending the state’s vertically integrated utility energy market structure.
If passed, the bill would establish a commission to study the effects of a statewide, or potentially regional RTO, a harbinger for the state to “move away from its vertically integrated model” according to state senator Tom Davis. The bill passed the House overwhelmingly in February.
Notably, the RTO structure to be studied by this potential commission is different than the Southeast Energy Exchange Market currently being discussed by southern mega utilities. Whereas SEEM would be voluntary and keep regional utility monopolies intact, the legislature appointed commission would study the effects of eliminating such monopolies and fully embracing competition in the market much akin to the ERCOT structure in Texas. This would be a mandatory and massively market-altering change, and would be much more favorable to consumers according to Davis.
“Whatever short-term merit there might be in this arrangement among monopolies, state lawmakers must keep their eye on the prize of open and competitive energy production markets,” Davis wrote in an op-ed last week.
The vertical utility structure has existed in South Carolina for over half a century, but Davis says that Santee Cooper and SCE&G’s USD 9bn investment in the abandoned V.C. Summer Nuclear project proves that this model has overstayed its welcome.
“As the nuclear-facility debacle in Fairfield County illustrated, with USD 9bn having been spent by Santee Cooper and SCE&G to be paid for by their customers on a now abandoned project, there are dangers inherent in this model,” Davis wrote. “Mega-utilities with service-area monopolies will inevitably pursue capital-intensive projects because the return they get is directly related to what they spend. There is little incentive for them to embrace cutting-edge technologies in order to lower energy production costs for the benefit of consumers.”
South Carolina has been making moves toward incorporating more competition into its energy markets over the past year. The legislature passed the Energy Freedom Act last year, which allows third party generators to compete with utilities if they are able to provide power at a lower cost. According to Davis, this bill was drafted in response to “some of the highest electricity bills in the nation.”
“By passing the Energy Freedom Act last year, the South Carolina General Assembly took a first step away from the energy-production monopolies that have saddled our state with some of the highest electricity bills in the nation and toward real competition through an open market of many buyers and sellers that will provide downward pressure on the cost of producing energy,” Davis wrote. “The next step toward that goal is for the General Assembly to formally study how our residents and businesses can benefit from a fully competitive market structure through an RTO and to lay the foundation for our state’s move away from its vertically integrated utility model.”
Recently, a study from Energy Innovation found that by introducing competition through an RTO and eliminating the vertical utility structure found across the Southeast, the region could save USD 348 bn and exponentially expand its renewable capacity many times over what is currently projected.
In order for a vote to be held on HB 4940 in the senate, the body would have to unanimously agree to consider the measure. But Davis says that the bill “has a very good chance” of getting a vote due to its bipartisan appeal and lack of potential debate.