Energy Monopoly Stifles Innovation in Austin

February 6, 2015

Power lines .jpg

Power lines in Texas. Photo by Flickr user Sid Pena, used under Creative Commons license.

AUSTIN -  Central Texas' energy economy boasts 250 companies making $2.5 billion a year and employing some 18,000 employees. Not bad for a region in the shadow of the nation's energy colossus, Houston. Yet there's just one problem: monopoly. And not just any monopoly. A city-run energy utility that stifles innovation in the region's largest city, Austin.

Austin's retail energy market is controlled by one operator: the aptly named Austin Energy. Startups view the monopoly as helpful when they're in their infancy, but costly when they look to "grow up." Austin Energy has little incentive to innovate and at time seeks to protect itself from potentially disruptive technologies developed by local startups. Local energy firms can get by comfortably at best, but as one local entrepreneur attested, "We need more fire in our belly."

Meanwhile, Dallas and Houston, nearly alone among America's major cities, adopted retail electric competition years ago. The upshot is that customers can "fire" their energy supplier whenever they'd like. Austin's startups say this leads to an incredible innovative retail energy market.

As an energy startup, if you can effectively compete in Houston you can compete anywhere. This means that Austin's energy startups want to expand and operate in competitive markets like Houston first, rather than in Austin's coddled marketplace where there is no good channel to market locally. While Austin sometimes boasts of its "enlightened" energy monopoly, as one startup leader attests, "Monopoly wins every time."

Ironically then, a monopoly meant to protect consumers may in fact leave them worse off relative to their Texas neighbors.

 

This is one of four blog posts stemming from a recent roundtable discussion with startup leaders and officials in Austin, TX. The roundtable was hosted by the U.S. Chamber of Commerce Foundation and Washington, D.C. startup incubator 1776, as part of its Innovation That Matters series. 

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