On December 18, 2023, the Electric Power Supply Association (EPSA) released a new analysis that looks at the impacts of different energy resource options on the reliability of the electric grid.[1] The report is an effort to better look at 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. It also seeks to provide a fuller picture of the true costs of integrating different energy resources onto the grid—with important implications for policymakers, regulators, and voters. The analysis was conducted by FTI Consulting on behalf of EPSA and utilized publicly available data from PJM Interconnection, which covers more than 65 million Americans across 13 states and the District of Columbia. The metric was developed using PJM’s cost and demand forecasts looking ahead to 2026.
A key finding of the study was that the cost of providing resource adequacy services is more than 100% of the traditional LCOE cost of wind and solar units. In addition, while traditional LCOE is lower for wind and solar units compared to combined cycle 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. The study also found that tax credits are crucial for making carbon capture and storage (CCS)-equipped units economical, even at the low technology costs assumed by the National Renewable Energy Laboratory (NREL). Further, 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.
[1] https://epsa.org/new-analysis-examines-system-wide-costs-of-energy-transition/