States with deregulated electricity markets could deploy clean energy technologies with long development timelines more effectively by using state-led planning, the Clean Air Task Force said in a report released Wednesday. The study focuses on technologies like nuclear power, offshore wind, geothermal, and long-duration energy storage—all of which face significant development barriers and extended lead times. While deregulated markets boost operational efficiency and enable regional power trading, the report argues that their short-term pricing structures don't provide adequate signals for investments requiring decades of planning.
The shift toward deregulated regional markets removed much of the long-term planning that once existed under vertically integrated utilities, according to Kasparas Spokas, the report's lead author and director of CATF's electricity program. When states deregulated, that planning "got replaced by market incentives," but those market structures were never tested during significant periods of increased electricity demand, he said. Today's power grid also faces substantially higher congestion levels than when deregulation occurred. The report notes that in deregulated states, clean electricity standards and market prices don't offer sufficiently strong long-term price signals and aren't designed to overcome non-cost obstacles to developing these technologies.
The report identifies three essential components for improving long-term planning in deregulated markets without forcing states to return to vertically integrated utilities: periodic, scenario-based assessments of long-term system requirements; technology development roadmaps; and development mandates or state-led procurement. Spokas pointed to California, New York, and Illinois as states that lack vertically integrated markets but have pursued state-directed planning. He called Illinois' Clean and Reliable Grid Affordability Act—which took effect in June—"model legislation" that formalizes state-led planning and procurement. The state is implementing it now over the course of a year, and "there are bound to be lessons learned," Spokas said, though "it has been a good process" so far.
The report's analysis suggests that deregulated markets struggle with clean energy deployment because they inherently prioritize near-term pricing over the decades-long investment horizons these technologies require. When deregulation happened, the process of addressing long-term uncertainty and procuring technologies with extended lead times became "disaggregated (and largely atrophied)" in deregulated regions, according to the study. More comprehensive planning would enable states to assess different future scenarios and mitigate various risks proactively, Spokas explained. Even when development problems occur outside a state's control—like New York's offshore wind project cancellations and delays that have hampered its clean energy goals—better planning creates "embedded capacity to plan and assess system needs so that you can pivot quicker." The report notes that plans can fail when permits or financing can't be secured, with permit denials, community opposition, and lack of available transmission being the leading causes of solar and wind project cancellations.
Federal action could strengthen state planning efforts, Spokas said, particularly through permitting and siting clarity, implementation of the Federal Energy Regulatory Commission's Order 1920, and reforms to interconnection queue processes and capacity markets. FERC gave a boost to long-lead-time planning in June by approving a waiver allowing Constellation Energy to transfer capacity interconnection rights to increase electricity delivery from Pennsylvania's Crane nuclear plant. The federal government has "a big role to play" for technologies like nuclear, geothermal, offshore wind, and long-duration storage, Spokas said, through state-federal collaboration on public financing and maintaining tax credits and incentives for these technologies.