Power Sector Transformation

Favorable economics and technological innovations are yielding enormous opportunities to transition America to a clean, affordable, and reliable electricity grid. In many parts of the country, renewable energy technologies like wind and solar have become cost-competitive or even cheaper than conventional energy sources. Extensive modeling by government agencies and national labs demonstrates that a high-renewables electricity future can be just as reliable as our current fossil fuel-dominated system, and can be achieved at no additional cost.

Falling costs coupled with falling emissions is the new normal. Wind power provides more than half of the electricity needed at certain times in several regions of the U.S., solar-rich California’s grid has been majority solar-powered at times, and new transmission construction  has increased to connect cheap renewable resources to other parts of the country.  Major utilities are announcing rapid transitions to clean energy with customer affordability in mind as economics and policy are driving variable wind and solar to become the electricity grid’s new backbone.

The variability and low- or zero-marginal cost associated with wind and solar means the institutions governing and managing the grid must evolve as renewables make up a greater share of our power. Likewise, with flat demand growth exacerbated by customers and third parties providing more of their own electricity, incumbent utilities must identify a new role for themselves. In response, utilities and electricity markets are increasingly taking note of these new realities. Nearly a dozen states are considering or pursuing opportunities to evolve their utility business models—shifting toward performance-based regulation to align utility finances with the outcomes that customers want from the grid. Several wholesale markets are also undergoing redesigns, and exploring ways to operate with more grid flexibility.

Our Work

ERCOT control room, image via Wikimedia Commons

Energy Innovation aims to accelerate the momentum of these transitions and maximize the decarbonization benefits available to the power sector. We do this by providing responsive research to policymakers, conducting careful analysis to advise advocacy efforts, and bringing clarity to the conversation surrounding renewable energy. We pursue these actions through the America’s Power Plan (APP) network of more than 200 electricity experts that we partner with to develop tools and resources to aid decision-makers addressing these power sector challenges.

Specifically, our work is guided by three broad objectives:

  1. Responsibly manage the transition to a cleaner and more flexible grid: Advances in information technology and power electronics have enabled the transition to a flexible power system that can cost-effectively balance variable renewable energy across the grid. We curate technical studies and conduct comprehensive analysis to clarify renewable energy capabilities, and highlight opportunities to modernize the grid in a way that at once improves its environmental impact, affordability, and reliability.
  2. Work with utilities to be proactive as the power sector transforms: Customer- and technology-driven changes to the grid demand a new role for electric utilities as service providers. We help utilities identify new ways to create value for their customers, and work with public utility commissions to create methods for encouraging and perpetuating utilities’ shifting role. In particular, we have designed mechanisms to make an affordable, reliable, clean grid the most profitable course of action for utilities, incentivizing them to value outcomes such as improved energy efficiency, reduced peak load, and a modern distribution system.
  3. Ensure wholesale power markets remain technology-neutral and competitive as the grid evolves: We also produce research and work on the ways electricity markets can evolve to handle an influx of zero-marginal cost power sources. This includes a particular focus on ensuring flexible resources are rewarded for the value they provide to a system with variable resources as the largest power producers.  Energy Innovation identifies opportunities to help future wholesale markets manage these grid transformations and maintain their ability to deliver value to the system.

The Power Sector Transformation Team