Written by Andrew McNeill President and Senior Policy Fellow at the Kentucky Forum for Rights
To preserve the legacies of some of the most consequential Americans to ever live, the industrialist Henry Ford collected and reassembled a number of buildings and structures at a place called Greenfield Village. Part of the Henry Ford Museum, the outdoor park offers “the sensations of America’s fascinating formation, where over 80 acres brim with resourcefulness and ingenuity.”
The most fascinating reconstruction is Thomas Edison’s Menlo Park Laboratory, the space where the genius started down his path to transform the world. Nothing has done more to lift humanity out of poverty than affordable and dispatchable energy and no one was more important to that than Edison.
A hundred years ago, only 30 percent of Americans had electricity in their homes. Today, we flip a switch and the lights come on. Refrigeration preserves our food. Air conditioning makes the summers bearable. We’ve grown so accustomed to modern day necessities that we lose sight of how amazed we should be at what’s available at our fingertips.
Reliable electricity is the foundation of economic growth; economic growth drives higher living standards. China’s push to build generation capacity is Exhibit 1 of this fact. Socialism destroyed Venezuela’s energy sector and plunged its people into widespread and brutal poverty, also proving the point.
In the United States, electric utilities’ planning horizons are measured not in years, but decades. Building generation and distribution is the ultimate sign of long-term confidence. And, as long as it is reasonable, I’m willing to pay my part for a high level of certainty that capital committed today strengthens resilience against future power outages and will be keeping Kentuckians’ homes warm in the winter 30 to 40 years from now.
Still, any increase in electricity rates is like catnip to politicians and the media. The public’s attention is pointed to the headline costs without much mention made to the enormous benefits that accrue to consumers.
I’m a free-marketer to the core but recognize that the most cost-effective way to deliver certain essential services is through negotiations at a government agency. Electricity is one of them.
Kentucky’s electricity market is a regulated market where the rates consumers pay are set by the Public Service Commission (PSC). Before making major investments, a regulated utility basically asks the PSC for permission to move forward. That initiates a quasi-judicial process with multiple parties entering evidence and arguing on behalf of their constituencies. Consumers are represented by the Attorney General’s Office and, oftentimes, by other organizations that have standing to participate (e.g. community action agencies).
After thousands of pages of documents are submitted and public hearings are conducted, the PSC determines what to approve (or not approve) and sets a “fair, just and reasonable” rate to pay for it.
Economists are right to remind us “there’s no such thing as a free lunch.” Like everything, the runaway inflation during the past few years has resulted in higher costs to build and maintain the infrastructure that delivers power to our homes and businesses. And yet, Kentucky has – and should continue to have – some of the most affordable electricity rates in the country.
Artificial intelligence (A.I.) could be as transformational as Edison’s light bulb. As amazing as it might one day be, remember that it needs to be plugged into an electric outlet to generate any output. Electricity is life, the ultimate platform that nearly every application depends upon.
If you’re excited about A.I. or simply love to stream content from your phone and television, more data centers need to be built. There aren’t enough words left in this column to dive into the controversies surrounding site selection for these facilities.
However, there’s more than a little irony that the loudest voices in these debates rely on social media made possible by hyperscale data centers. Critics want to be heard, but only if the facilities needed to make that happen are built somewhere else.