High Electricity Prices? Utilities Have a Coupon for That
Through the Energy Infrastructure Reinvestment program, utility grid investments can be much more affordable and just as reliable.
How to Promote Affordable, Reliable Electricity
A Compilation of RMI Research and Analysis for US State Policymakers
As electricity demand grows to power new loads like surging manufacturing, data centers driven by the advent of AI, and electrified buildings and vehicles, and old infrastructure is set to retire, we must build out the US electricity system in ways that keep energy costs affordable for customers while reliably keeping the lights on. RMI research and analysis over many years and several workstreams — as collected here — has underscored five key findings that can support an affordable, reliable, resilient, and secure power system.
- Clean energy portfolios can provide affordable — and reliable — power.
- Clean energy has helped keep the lights on during extreme weather events.
- Improving interconnection and transmission offer critical opportunities to improve reliability.
- Regulatory actions and utility business model innovation can help increase affordability and reliability as the grid grows and modernizes.
- Federal funding exists to support these solutions.
Key findings, with links to more information, are summarized below.
Clean energy portfolios can provide affordable – and reliable – power.
Since 2018, RMI analysis has shown that portfolios of carbon-free resources — including wind, solar, battery storage, energy efficiency, and demand flexibility — can be more affordable and just as reliable as coal- and gas-fired power plants. The experience of leading utilities provides real-world evidence supporting this analysis.
Today, clean, renewable sources are cheaper than 99 percent of proposed gas plants when taking full advantage of the tax credits in the Inflation Reduction Act. These clean sources also avoid fuel price volatility in American household energy bills. Demand-side resources — including energy efficiency, distributed solar and batteries, demand-side management, and “virtual power plants” that compensate customers for their energy conservation efforts — are important elements of clean energy portfolios. These resources can play a central role in maintaining reliability and can often be deployed more quickly and at lower cost than new supply-side resources.
Clean repowering — the opportunity to connect clean energy resources at the point of interconnection for existing fossil plants — can reduce the time needed to connect new projects to the grid from an average of five years to less than one year. With the current federal tax credits and programs in the Inflation Reduction Act (IRA), clean repowering can unlock 250 GW of clean energy that saves customers $12.7 billion per year.
Clean energy has helped keep the lights on during extreme weather events.
Extreme weather is testing the reliability of the grid, but clean energy has demonstrated its ability to support the grid during these events.
For example, abundant wind energy helped keep the lights on around the country during Winter Storm Elliot in December 2022, when coal and gas failed. These clean resources could have done even more with additional wind turbines and interregional transmission. In Summer 2023, record clean energy generation levels helped the grid meet higher demand, including preventing rolling blackouts during the hottest summer on record.
On the other hand, fossil fuel generation has proven costly and unreliable. For example, the independent market monitor in Texas found that using coal and gas plants to address reliability issues has cost households and consumers over $1 billion. And fossil fuel infrastructure failures contributed to major outages in Texas in 2021 and California in 2020.
With this evidence and more, RMI has debunked the myths that renewables are the primary cause of winter outages. In fact, major winter reliability risks relate to fossil generators and the reliability of fuel supply. This is, in part, because fossil resource reliability has historically been overestimated. Importantly, while renewables are variable, they are predictably variable unlike unexpected fossil-powered outages.
Improving interconnection and transmission offer critical opportunities to improve reliability.
Unlocking interconnection queues and new transmission investment is key to improving national grid reliability and taking full advantage of our country’s solar and wind potential. Hundreds of billions of dollars of new renewable energy projects are currently waiting in line to connect to the grid, while the power grid is rapidly approaching its capacity to transport power at the scale needed to keep the lights on.
Extreme weather events have proven the critical role of interregional transmission and the opportunity to connect excess clean energy generation to regions at risk of blackouts.
As it stands, the US power grid is fragmented and lacks a cohesive plan, resulting in several challenges and associated solutions. These solutions include those that enhance grid efficiency and bring clean energy projects online faster, and those that expedite planning for expanded interregional transmission:
- Grid enhancing technologies (GETs) deliver energy cheaper, cleaner, and faster — as shown in this analysis for PJM.
- Reconductoring with advanced conductors will accelerate transmission expansion (non-RMI resource).
- Near-term next steps on transmission planning can be taken now.
- Interconnection queue reform will get clean energy on the grid faster.
- Improved collaboration can strengthen resource adequacy and expand regional transmission (e.g., in western states).
As we take steps to improve interconnection processes and accelerate transmission development, technologies and upgrades that increase the capacity of existing transmission lines can help bring more clean energy online faster to meet new loads, at a lower cost than standard grid upgrades. In PJM, for example, GETs could help bring 6.6 GW of clean energy online by 2027 saving $1 billion per year in production costs. And as investments in transmission are prioritized, it’s important to invest in the right solutions on the interregional and regional scale.
Regulatory actions and utility business model innovation can help increase affordability and reliability, as the grid grows and modernizes.
There are several ways that regulators can change utility incentive systems to encourage utilities to take advantage of federal funding and maximize affordability, reliability, and equity benefits for customers. Potential reforms include performance-based regulation to restructure utility incentives (including performance incentive mechanisms [PIMs], multi-year rate plans [MYRPs], capex/opex equalization [such as totex ratemaking], and revenue decoupling), all-source procurements, and fuel-cost pass-through reform.
Strategies include several short-term and long-term solutions to high winter energy costs due to high fossil fuel prices and cold weather, and strategies to address the outsized energy burden of low-income communities.
Importantly, fossil fuels are volatile in price based on extreme weather, geopolitical conflicts, and other factors, and these volatile fuel costs are usually passed through completely to customers, discouraging good fuel cost management. Several strategies exist to address these misaligned incentives.
Federal funding can support transformative investments to improve reliability while keeping costs down.
The Inflation Reduction Act (IRA), and other related federal policies and programs provide hundreds of billions of dollars of federal investment that can support the affordability and reliability solutions identified above.
The IRA alone includes dozens of programs and tax incentives that can promote clean, reliable, and affordable power that can be incorporated into utility investment plans.
In particular, the IRA’s Energy Infrastructure Reinvestment program presents an opportunity to reinvest in energy communities while saving customers money and accelerating the transition to a clean and reliable power grid.
Opportunities exist across the country to leverage IRA incentives and save customers money — with benefits from Clean Repowering alone totaling an average of $12.7 billion per year for the next 10 years.
Affordability
Power Shift
Virtual Power Plants can meet emerging grid needs, reduce emissions, and reduce costs when they’re fully included in grid planning and operations.
IRA Opportunity Map
The IRA Opportunity Map currently shows the system savings and clean energy deployment opportunities available using RMI's "clean repowering" strategy for resource deployment.
Meeting Summer Peaks: The Need for Virtual Power Plants
Utilities and their regulators need solutions to manage load growth and extreme heat. Virtual power plants support summer reliability, affordability, and resilience.
Improving Energy Affordability through Economic Dispatch
When utilities prioritize running more expensive power plants before cheaper ones, customers pick up the tab. Economic dispatch can change that.
A Severe Winter Means High Energy Bills
How state utility regulators can help relieve hardship due to high energy prices.
1 in 7 Families Live in Energy Poverty. States Can Ease That Burden.
States — including those leading on climate — can leverage key policies and IRA funding to lower the energy burden borne by low-income households.
Clean Energy 101: Virtual Power Plants
Homes and businesses can make the grid more reliable, and get paid to do so, by forming virtual power plants.
The Business Case for New Gas Is Shrinking
Taking full advantage of the tax credits in the Inflation Reduction Act, can make clean, renewable energy cheaper than 99 percent of proposed gas plants.
Reality Check: US Renewable Energy Portfolios Can Outcompete New Gas Plants
Currently available renewable energy technologies are often cheaper than gas.
Federal Clean Energy Incentives
High Electricity Prices? Utilities Have a Coupon for That
Through the Energy Infrastructure Reinvestment program, utility grid investments can be much more affordable and just as reliable.
How Utility Regulators Can Unlock $12.7 Billion in Annual Savings for Customers
Clean Repowering is a no-regrets method to accelerate renewable energy deployment and redevelop energy infrastructure across the United States.
How Regulators Can Direct Utilities to Leverage IRA Savings
Lessons from the public utility commissions taking decisive action to pass IRA benefits to utility customers.
Planning to Harness the Inflation Reduction Act
A toolkit for electric utility regulators to ensure utility resource plans incorporate the opportunities presented by federal funding.
RMI’s Guide to Federal Clean Energy Incentives
A guide to federal clean energy incentives to learn how to maximize benefits from the Inflation Reduction Act, the Bipartisan Infrastructure Law, and related federal policies and incentives.
The Most Important Clean Energy Policy You’ve Never Heard About
The Inflation Reduction Act includes a little-known provision that reinvests in energy communities while reducing carbon emissions.
Breaking Down the Inflation Reduction Act. Program by Program. Incentive by Incentive.
This spreadsheet breaks down the funding opportunities in the IRA to allow a variety of users to easily find out which programs and tax incentives can benefit them.
Transmission and Interconnection
Clean Repowering
RMI research and analysis highlights how clean energy resources can interconnect faster and cheaper by developing at existing generation sites.
States in Sync
Western states must collaborate to expand the region’s electricity transmission system and unlock incredible economic opportunities.
GETting Interconnected in PJM
An analysis of grid-enhancing technologies (GETs) as network upgrades to accelerate the interconnection of projects in PJM’s queue.
Mind the Regulatory Gap
A regulatory gap has led to a costly shift in utility investment to local transmission assets, putting the energy transition at risk.
GET a GRIP: A Path to More Renewable Energy on the Grid
Grid-enhancing technologies could increase grid transmission capacity at a low cost. New DOE funds make that opportunity even more attractive.
Breaking Down Barriers for a More Reliable Grid
State utility recommendations to avoid "siloed, reactive planning” are just a starting point for strengthening resource adequacy through increased collaboration.
Going the Distance on Interconnection Queue Reform
FERC’s rulemaking takes us only part of the way to effective and efficient interconnection.
Cheaper, Cleaner, Faster
Four strategies utility regulators can use to accelerate new renewables interconnection.
Increased Spending on Transmission in PJM — Is It the Right Type of Line?
PJM utilities have increased their spending on transmission in recent years but more so on low-voltage projects that don’t advance large-scale grid decarbonization.
Wasted Wind and Tenable Transmission during Winter Storm Elliott
More wind energy and interregional transmission could have mitigated the impacts of rolling blackouts experienced during Winter Storm Elliott.
Reality Check: The United States Has the Only Major Power Grid without a Plan
The US electric grid is fragmented into independent grids and transmission planning regions, which poses a threat to reliability, especially during increasingly frequent extreme weather events.
Reliability
Reality Check: Dispatchability and Reliability Are Not the Same Thing
Focusing on how resources on the grid work together — instead of focusing on the characteristics of any individual resource — can unlock the most effective and affordable solutions to ensure reliable electric power.
Clean Energy 101: How Batteries Can Support Grid Reliability
Grid-scale battery storage can beat traditional technologies in keeping our electric grid running in the face of rising demand.
Breaking Down Barriers for a More Reliable Grid
State utility recommendations to avoid "siloed, reactive planning” are just a starting point for strengthening resource adequacy through increased collaboration.
Reality Check: Keeping the Lights on in Extreme Winter Weather
Grid outages in extreme weather are a fossil fuel problem, not a renewable energy problem.
Beating the Heat: The Summer Clean Energy Records Worth Celebrating
Grid-level data shows that clean energy generation reached new heights across the United States this summer.
Wasted Wind and Tenable Transmission during Winter Storm Elliott
More wind energy and interregional transmission could have mitigated the impacts of rolling blackouts experienced during Winter Storm Elliott.
The Business Case for New Gas Is Shrinking
Taking full advantage of the tax credits in the Inflation Reduction Act, can make clean, renewable energy cheaper than 99 percent of proposed gas plants.
The Solution to Grid Reliability? Go Bigger and Bolder on Renewables and Energy Storage
Doubling down on fossil fuels is a misguided and costly way to try to avoid the kinds of grid issues now being faced in Texas.
Clean Energy Portfolios
RMI research has consistently shown that “clean energy portfolios” (CEPs)—comprising wind, solar, battery storage, energy efficiency, and demand flexibility—are now cost-competitive with new natural gas power plants, while providing the same grid reliability services.
Reality Check: US Renewable Energy Portfolios Can Outcompete New Gas Plants
Currently available renewable energy technologies are often cheaper than gas.
Utility Business Models
The Nuts and Bolts of Performance-Based Regulation
This guide introduces the basics of performance-based regulation (PBR), outlining the need for reform, PBR tools, related reforms, and case studies.
How to Restructure Utility Incentives
Guidance for regulators and stakeholders on how to use comprehensive performance-based regulation to improve utility incentives.
Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond
Regulators in at least seven jurisdictions have adopted performance incentive mechanisms (PIMs) and complementary reforms to elevate equity in the clean energy transition.
Strategies for Encouraging Good Fuel-Cost Management
A handbook for utility regulators that details strategies for controlling the cost of fuel.
For Ratepayers to Realize Savings from Clean Energy, Utility Business Models Need an Update
We have tools to accelerate the energy transition that will save ratepayers money and bolster the grid — we just need to incentivize utilities to use them.
Making the Clean Energy Transition Affordable
his report explores how totex ratemaking could help keep utility rates affordable through the clean energy transition by putting utility capex and opex projects on a level playing field.