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AbstractElectric power sectors around the world have changed dramatically in the last 25 years as a result of sector liberalization policies. Many electricity sectors are now pursuing deep decarbonization goals which will entail replacing dispatchable fossil generation primarily with intermittent renewable generation (wind and solar) over the next 20–30 years. This transition creates new challenges for both short-term wholesale market design and investment incentives consistent with achieving both decarbonization commitments and security of supply criteria. Thinking broadly about the options for institutional change from a Williamsonian perspective – thinking like Williamson – provides a useful framework for examining institutional adaptation. Hybrid markets that combine 'competition for the market' that relies on competitive procurement for long-term purchased power agreements with wind, solar, and storage developers, ideally in a technology neutral fashion, and 'competition in the market' that relies on short-term markets designed to produce efficient and reliable operations of intermittent generation and storage, is identified as a promising direction for institutional adaptation. Many auction, contract, and market integration issues remain to be resolved.

The history of natural gas wellhead and pipeline regulation, deregulation and regulatory reforms are discussed. These reforms brought natural gas shortages and pipeline inefficiencies to an end. They also created an economic platform that could support unanticipated developments in the supply and costs of domestic natural gas. Such unanticipated developments emerged in the last few years as several technological innovations came together to make it commercially attractive to development US shale gas deposits located deep in the earth. How and why shale gas supplies will lead to dramatic changes in the United States' energy future with appropriate environmental regulatory reforms are discussed.

Oliver Williamson's work on transaction cost economics, and more generally on the factors that determine the boundaries between firms and markets, has provided key insights that have significantly expanded our understanding of the attributes of transactions and organizations that lead to vertical integration and vertical contractual relationships more broadly. Transaction cost—based theories of vertical integration focus on the implications of incomplete contracts, asset specificity, information imperfections, incentives for opportunistic behavior, and the costs and benefits of internal organization. These theories focus on efforts by firms to mitigate transaction costs and various contractual hazards that may arise with anonymous spot market transactions by choosing among alternative organizational and contractual governance arrangements that can reduce these costs. There is substantial empirical support for these theories. Property rights—based theories are sometimes interpreted as formalizing some of Williamson's work. However, little empirical work has focused on property rights—based theories per se. Principal-agent theories of vertical integration that are distinguished from other organizational theories primarily by assumed differences in risk aversion between principals and agents and associated moral hazard problems have also been advanced. They add little to the other theories and have limited independent empirical support.

Economic evaluations of alternative electric generating technologies typically rely on comparisons between their expected "levelized cost" per MWh supplied. I demonstrate that this metric is inappropriate for comparing intermittent generating technologies like wind and solar with dispatchable generating technologies like nuclear, gas combined cycle, and coal. It overvalues intermittent generating technologies compared to dispatchable base load generating technologies. It also likely overvalues wind generating technologies compared to solar generating technologies. Integrating differences in production profiles, the associated variations in wholesale market prices of electricity, and life-cycle costs associated with different generating technologies is necessary to provide meaningful comparisons between them.