Grid planners and experts analyze: why the market continues to favor renewable energy

As U.S. electricity demand continues to grow and wind and solar power account for an increasing share of the U.S. energy mix, questions about the reliability of renewable energy have become more frequent, even reaching the highest levels of federal government discussions.

"For the grid, you have to balance supply and demand at every moment," Energy Secretary Chris Wright said recently on Fox News. "With wind and solar, you can't predict when they will generate and when they will disappear." Wright also noted that the growth of renewables has created an "additional distribution network" that has pushed up energy prices.

However, grid planners, operators, and analysts say that wind, solar, and batteries are important components of an evolving power system, and with advanced software and other tools, these intermittent resources can be reliably dispatched and called upon. They also point out that the levelized cost of electricity (LCOE) of renewables and their competitiveness in automated energy markets—where the cheapest units are selected hourly—are key reasons they continue to be chosen.

"System operators don't decide whether resources bidding into the market are good or bad," said Rob Gramlich, president of energy consulting firm Grid Strategies, in an interview. "There's no central decision-maker; the market doesn't favor any side."

As generators retire, demand rises, and challenges in construction, financing, permitting, and supply chains intensify, operators and analysts acknowledge concerns about the future of the U.S. power system. Many call for a diverse mix of resources, including renewables and storage, to ensure reliability and affordability.

"The goal of planning is to build a diverse resource portfolio at the lowest possible cost, avoiding over-reliance on any single resource," said Michael Eugenis, director of resource planning at Arizona Public Service. He said APS is developing renewables while pairing them with more natural gas to maintain reliability in its service area. "It's not a second or shadow resource," he added.

Automated markets are choosing renewables

One of the main concerns raised by Wright and others is the intermittency of renewables and its impact on grid reliability. One way grid operators measure reliability is through the "Effective Load Carrying Capability" (ELCC) metric. ELCC is a complex calculation that compares the average output of a resource's nameplate capacity over decades of simulations, including factors such as performance, supply and demand that cause variability. For fossil fuels, variability includes maintenance outages and fuel supply issues; weather changes affect wind and solar.

ELCC varies by region and system mix, but nuclear power typically has the highest ELCC, meaning its output is closest to nameplate capacity on average over many years. In the most recent auction of PJM Interconnection, the largest U.S. grid, nuclear's ELCC was set at 95%. Fixed-tilt solar was lowest at 8%; tracking solar was 11%. Onshore wind was 41%, offshore wind 69%; storage ranged from 50% to 72%; natural gas from 60% to 78%; and coal was 83%.

Despite the relatively low ELCC of renewables, automated markets continue to select them because they are cheaper when the grid needs them. "The automated market mechanism uses all relevant variables affecting load to select the cheapest resource," said Richard Doying, vice president of Grid Strategies and former executive vice president of markets and grid strategy at the Midcontinent Independent System Operator (MISO). These resources are bid in, then "the next cheapest resource, and so on," Doying said. "The market chooses wind and solar despite their lower ELCC and capacity value because the returns justify the investment," he added.

When renewables generate simultaneously, their cost is often lower than fossil fuel electricity. One reason is that fossil fuels have high, continuous, and volatile fuel and maintenance costs. For example, natural gas prices have nearly doubled since 2024 but remain below levels after Russia's invasion of Ukraine in 2022. Wind and solar have zero fuel costs, significantly lower maintenance outage costs, and capital expenditures for construction projects are typically amortized over 20 years. "If natural gas is the cheapest option to meet peak demand, the market will choose it," said Sean Kelly, co-founder and CEO of forecasting service provider Amperon and former energy analyst.

When the sun doesn't shine

Kelly said today's advanced load and weather forecasting enhances the reliability of resource portfolios with high renewable penetration. While good forecasts can greatly reduce the need for backup generation, he noted that rising electricity demand may still require more reliable generation to fill gaps when there is no wind or sun. The ability to select the cheapest available power in real time is why grid operators see renewables as an important part of the same increasingly flexible power system, not a separate one.

"We don't have different systems; we have a mix of resources and capabilities to meet system needs," said Mark Rothleder, senior vice president and chief operating officer of the California Independent System Operator (CAISO), in an interview. California has one of the highest renewable penetration rates in the U.S. and also ranks among the top in electricity prices. Some observers link the two, suggesting renewables drive up energy costs.

But other states with high renewable shares have electricity prices relatively lower than the national average. For example, according to the U.S. Energy Information Administration (EIA), wind power accounted for 59% of Iowa's electricity in 2023, and that year Iowa was also among the 10 states with the lowest average electricity prices. Although solar and wind are not always locally available during peak demand, storage penetration is rising, and some states are moving toward more regional energy markets, making it easier to trade cheap renewable power across state lines.

The New York Independent System Operator (NYISO) said in a recent report that while "time-limited" generators like wind and solar require backup resources when renewable availability declines, "no generation type can run at full capacity around the clock." Experts say simply categorizing resources as intermittent or backup oversimplifies grid complexity. "Wind and solar don't need to generate 100% of the time because people don't consume all available power 100% of the time," said Beth Garza, senior fellow at the R Street Institute think tank and former CEO of ERCOT's market monitoring. "It's easy to demonize solar and wind," Garza said, "but regardless of the resource mix, average electricity load is only about half of peak demand."

When demand peaks

Power systems have long been required to maintain reserve capacity above the highest expected peak demand, and the growth of wind and solar has not changed that, said Julia Matevosyan, deputy director and chief engineer at the Energy Systems Integration Group and former ERCOT planning engineer. But software advances and market shifts have democratized incentives for energy production, conservation, and storage, smoothing demand peaks and deploying resources on demand. This flexibility can optimize wind, solar, and batteries to provide low-cost power more reliably than "a more limited traditional resource mix," Matevosyan said.

This summer, California deployed what some advocates call the world's largest virtual power plant (VPP): multiple aggregators released an average of 539 megawatts from over 100,000 customer-side batteries during the 7-9 PM peak hours. A study commissioned by the Brattle Group for Sunrun and Tesla Energy (both companies participated in the VPP project) concluded that the project could reduce the need for natural gas peaker plants and potentially save ratepayers $206 million between 2025 and 2028. Ryan Hledik, one of the report's authors, said VPPs better utilize already deployed assets. "There are growing examples of VPPs scaling faster and at lower cost than traditional resources," Hledik said.

Renewables continue to dominate new generation as demand rises

U.S. electricity demand is rising for the first time in two decades. Last year, the country used more electricity than ever before, and the EIA expects demand to grow at more than 2% annually at least through 2026. Longer-term forecasts vary widely, heavily dependent on growth in data centers, electrification, and manufacturing. Currently, the vast majority of new generation resources are renewables, led by solar, followed by wind. According to the Federal Energy Regulatory Commission's (FERC) "Energy Infrastructure Update" report released in September 2025, of the 21.5 gigawatts added to the U.S. power system in the first seven months of 2025, solar accounted for over 16 gigawatts, wind nearly 3.3 gigawatts, and natural gas 2.2 gigawatts.

Phasing out federal tax credits and other incentives have driven renewable development. But experts say that even without these supports, economics favor renewables. According to Lazard's analysis, utility-scale solar and onshore wind remain "the most cost-effective forms of new generation on an unsubsidized basis." The LCOE calculation involves capital costs, fuel costs, capacity factors, and other values that vary by location and time.

Recently, renewable trade groups have warned of a potential slowdown in the solar industry. But alternative resources like natural gas also face their own challenges, from lengthy planning and permitting processes to rising fuel prices and multi-year equipment backlogs. "The newest, most efficient gas peakers are expensive to build, and operating costs could rise further due to gas competition," Garza said. "The market's answer to load growth remains building more wind, solar, and batteries because they are cheaper and faster to build." Michelle Solomon, electricity policy manager at Energy Innovation, echoed similar views. She said utility planning models "have largely chosen wind, solar, and batteries for years," and "a diverse resource mix is most likely the cheapest combination."