Power Sector Transformation

Favorable economics and technological innovations are rapidly 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 are 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, albeit not fast enough to meet demand. 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. Organized wholesale markets and utility regulation must evolve to support a rapid transition away from uneconomic fossil resources, and new investment in a complementary mix of clean energy, storage, efficiency, and behind-the-meter resources. New models for operating an increasingly distributed and weather-dependent system must be developed.

Changes on the customer side of the meter are also transforming the way utilities provide power and make money. Efficiency and demand response continue to scale and undermine utility demand growth. Customers providing their own power through solar and storage exacerbates efficiency-driven flat demand for electricity. Electrification of vehicles and building heating applications, married with automation technology, make it possible for customers to respond in real time to the availability of clean cheap power, potentially saving billions and obviating the need for hundreds of fossil power plants that currently provide these services.

In response, utilities and electricity markets are increasingly taking note of these new realities. A growing chorus of 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. Awareness about the need to rapidly expand and site a robust, modern transmission grid is growing. Wholesale markets are exploring ways to operate with more grid flexibility. States are exploring innovative models to finance the transition from coal to clean.

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 support advocacy efforts, and bringing clarity to the conversation surrounding renewable energy. Our work originated from the America’s Power Plan (APP) project, which started with an overview paper and a series of seven whitepapers on the power sector transformation and grew into a network of more than 200 electricity expert partners. The America’s Power Plan work now continues through Energy Innovation. Explore our foundational America’s Power Plan work and our current work streams:

Power Sector Transformation Topics

Financial Transition

The rapid cost decline of renewable energy means running existing coal generation now exceeds the all-in cost of replacing it with wind and solar in most of the United States. This “coal cost crossover” begs regulators and utilities to reconsider the prudency of continuing to operate existing coal plants.

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Power Market Design

Competitive wholesale electricity markets are at a turning point. Current market rules and practices were established to manage a system built around large central plant stations generating electricity to meet inflexible demand. Prices and market revenues are tied to generators’ production costs, which have historically been largely dependent on the prices of fuels burned in those plants.

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Ratemaking and Utility Business Models

The United States’ electric power industry is changing fast. For a century, vertically integrated monopoly utilities built power plants, strung transmission and distribution lines, billed customers, and were rewarded with a predictable return on investment.

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Regional Transmission and Distribution Planning

Decisions and investments made in the coming decade will shape the course of the United States’ power sector, economy, and public health for decades to come. Will this massive investment lock in an inefficient, century-old system reliant primarily on centralized fossil fuel, or will it move us toward a cleaner, more efficient, and economic energy future?

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America’s Power Plan

America’s Power Plan was created as a platform for innovative thinking about how to manage the transformation happening in the electric power sector today. We brought together America’s clean energy thought leaders to assemble information on a package of policies, markets, and regulations to maximize the grid’s affordability, reliability/resilience, and environmental performance. America’s Power Plan work now continues through Energy Innovation.

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As power continues to get cleaner, it’s imperative that we plug in other sectors to this decarbonization opportunity.

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The Power Sector Transformation Team