FOR IMMEDIATE RELEASE: December 18, 2023
CONTACT: Christina Nyquist | 603.930.8818 | cnyquist@epsa.org
WASHINGTON, D.C. – Today, the Electric Power Supply Association (EPSA) released a new analysis evaluating the real-life impacts of different energy resource options on the reliability of the electric grid. The analysis is an effort to better capture the “full-cycle” levelized cost of electricity (LCOE), including the impact of regional costs, interconnection costs, curtailment costs, and the cost of ensuring that all units can provide an equivalent level of resource adequacy to the grid.
This analysis represents a critical step towards understanding the true costs of integrating different energy resources onto the grid—with important implications for policymakers, regulators, and voters.
To introduce the analysis, EPSA hosted a webinar in which study author and economist Robert Kaineg, managing director at FTI Consulting Inc., discussed his methodology, assumptions, and findings. The recording of the webinar is available at this link.
“EPSA members have been at the forefront of innovation and emissions reductions over the past two decades, including large-scale adoption of renewable resources. These resources play a vital and growing role on our grid. But it is critical that we have a clear understanding of what it costs to integrate these resources into our grid reliably. The future of our grid depends on balancing reliability, cost, and emissions. This analysis creates a better tool to help decision-makers understand those tradeoffs,” said EPSA President and CEO Todd Snitchler.
A megawatt of an intermittent resource like wind or solar is inherently not a direct one-for-one replacement for a megawatt of a conventional resource like nuclear or natural gas because intermittent resources are weather-dependent and face unique challenges in availability. Intermittent resources are not dispatchable when demand occurs, but only available when weather conditions are suitable.
Industry standard metrics for analyzing the cost of new resources have not widely accounted for the additional costs of ensuring that all units can provide an equivalent level of resource adequacy to the grid. This includes reliability measures, transmission growth, and the spare capacity needed to reliably integrate resources. This full-cycle LCOE can offer a more accurate “apples-to-apples” comparison between resources that accounts for the full spectrum of costs needed to ensure grid reliability.
Key findings from the new study include:
- The cost of providing resource adequacy services is more than 100% of the traditional LCOE cost of wind and solar units.
- While traditional LCOE is lower for wind and solar units compared to combined cycle (CC) natural gas units in PJM in 2026, when accounting for the full cost of connecting to the system and providing resource adequacy services, natural gas plants are more competitive.
- Tax credits are critical to making carbon capture and storage (CCS)-equipped units economical, even at the low technology costs assumed by the National Renewable Energy Laboratory (NREL).
- Small modular nuclear (SMR) nuclear units are competitive with other forms of non-emitting generation when accounting for the full cost of connecting to the system and providing resource adequacy services, at the technology costs assumed by NREL.
The analysis was conducted by FTI Consulting Inc. on behalf of EPSA and utilized publicly available data from the PJM Interconnection, which operates the largest organized electricity market in the U.S., covering more than 65 million Americans across 13 Mid-Atlantic and Midwest states and the District of Columbia. The metric was developed using PJM’s cost and demand forecasts looking ahead to 2026.
Robert Kaineg is a veteran economist who has worked with the World Bank and government agencies in Japan, Mexico, Norway, and Ukraine in matters related to CO2 markets and low carbon development strategies.
“This analysis represents a critical step towards a more accurate understanding of the costs of the energy transition. Reliable and cost-effective power is a bedrock of the economy and policymakers have to be clear-eyed about how policies may impact that. Having accurate data that captures the full system costs of integrating new resources on to the grid is essential to making smart decisions about the future of our energy system,” said Snitchler.
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The Electric Power Supply Association (EPSA) is the national trade association representing America’s competitive power suppliers. EPSA members provide about 150,000 MW of reliable and competitively priced electricity from environmentally responsible facilities using a diverse mix of fuels and technologies including natural gas, wind, solar, hydropower, geothermal, storage, biomass, and coal. EPSA seeks to bring the benefits of competition to all power customers. Learn more at www.epsa.org and connect with us on LinkedIn and Twitter @EPSAnews.
