Grid planners and experts analyze: Why the market continues to favor renewable energy
As U.S. electricity demand grows and the share of wind and solar power increases, concerns about the reliability of renewable energy are rising, even at the highest levels of the federal government. However, grid planners, operators, and analysts believe that wind, solar, and batteries are important components of the evolving power system, and that intermittent resources can be reliably dispatched through advanced software and other tools. They also note that the levelized cost of electricity for renewables and their competitiveness in automated energy markets are key reasons why the market continues to choose them.
As U.S. electricity demand continues to grow and wind and solar power account for an increasing share of the energy mix, questions about the reliability of renewable energy are becoming more frequent, even at the highest levels of the federal government.
"For the grid, supply and demand must be balanced at every moment," U.S. Energy Secretary Chris Wright said recently on Fox News. "With wind and solar, you can't predict when they will generate, and you can't predict when they will stop." Wright further noted that the growth of renewable energy has created an "additional distribution network" that has driven up energy prices.
However, utility planners, grid operators, and analysts believe that wind, solar, and battery storage are important components of an evolving power system, and that intermittent resources can be reliably dispatched with the help of advanced software and other tools. They also point out that the levelized cost of renewable energy and its competitiveness in automated energy markets—which select the lowest-cost units each hour—are reasons why the market continues to favor them.
"System operators do not judge whether resources bidding into the market are good or bad," said Rob Gramlich, president of energy industry consulting firm Grid Strategies, in an interview. "There is no central decision-maker; the market does not favor any side."
As generators retire, demand rises, and construction, financing, permitting, and supply chain challenges intensify, operators and analysts acknowledge concerns about the future of the U.S. power system. Many call for a diversified resource mix, including renewables and storage, to ensure electricity reliability and affordability.
"The goal of planning is to build a diversified resource portfolio at the lowest possible cost, avoiding excessive impact from any single resource," said Michael Eugenis, director of resource planning at Arizona Public Service. The company is pursuing renewables while also adding natural gas to maintain reliability in its service area. "This is 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 based on simulations of how much of a resource's nameplate capacity is generated on average over decades, incorporating variables such as performance, supply, and demand. For fossil fuels, variables include 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 average generation over many years is closest to its nameplate capacity. In PJM Interconnection, the largest U.S. grid, nuclear's ELCC was 95% in the most recent auction. Fixed-tilt solar was lowest at 8%, and tracking solar at 11%. Onshore wind was 41%, offshore wind 69%; storage ranged from 50% to 72%; natural gas from 60% to 78%; and coal was 83%.
"System operators do not judge whether resources bidding into the market are good or bad... the market does not favor any side."
Rob Gramlich
President of Grid Strategies
Despite relatively low ELCC, automated markets continue to choose renewables over other resources 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 market and grid strategy at the Midcontinent Independent System Operator. These resources are bid in, "then the next cheapest is selected, 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 and fossil fuels generate at the same time, renewables are usually cheaper. One reason is that fuel and maintenance costs for fossil fuels are high, continuous, and volatile. For example, natural gas prices have nearly doubled since 2024 but remain lower than levels after Russia's invasion of Ukraine in 2022. Wind and solar have zero fuel costs, significantly lower maintenance outage costs, and project construction capital expenditures 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 a former energy analyst.
When the sun doesn't shine
Kelly said that today's advanced load and weather forecasting technologies enhance 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 sun or wind.
The ability to select the cheapest available power source 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, in an interview.
California is one of the states with the highest renewable penetration in the U.S., and it also has among the highest electricity prices. Some observers link the two, arguing that renewables drive up energy costs.
But other states with high renewable shares have electricity prices relatively below the national average. For example, according to the U.S. Energy Information Administration, wind power accounted for 59% of Iowa's electricity in 2023, and the state's average electricity price that year was among the lowest 10 in the nation.
Although solar and wind are not always available during local demand peaks, storage penetration is rising, and some states are turning to regional energy markets, making it easier to trade cheap electricity produced by renewables across state lines. The New York Independent System Operator noted 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 that simply categorizing resources as intermittent or backup oversimplifies the complexity of the grid.
"Wind and solar don't have to generate 100% of the time because people don't consume all available electricity 100% of the time," said Beth Garza, senior fellow at the R Street Institute think tank and former CEO of ERCOT 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 required reserve capacity above the highest expected peak demand, and the growth of wind and solar has not changed that, said Julia Matvosyan, deputy director and chief engineer at the Energy Systems Integration Group and a former ERCOT planning engineer. But software advances and market shifts have democratized incentives for energy production, conservation, and storage, smoothing demand peaks and enabling resources to be deployed as needed. This flexibility can optimize wind, solar, and batteries to provide low-cost power more reliably than a "more limited traditional resource mix," Matvosyan said.
This summer, California deployed what some advocates call the world's largest virtual power plant, with multiple aggregators releasing an average of 539 megawatts from more than 100,000 customer-side batteries during the 7-9 PM peak period. A study by the Brattle Group commissioned by Sunrun and Tesla Energy—both participants 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 make better use of already deployed assets. "There are more and more examples showing that VPPs can scale faster and at lower cost than traditional resources," Hledik said.
As demand rises, renewables continue to dominate new generation
U.S. electricity demand is rising for the first time in two decades. Last year, U.S. electricity consumption hit a record high, and the EIA expects demand to grow at more than 2% annually through 2026. Further out, forecasts vary widely, highly 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 "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 more than 16 GW, wind nearly 3.3 GW, and natural gas 2.2 GW.
Federal tax credits and other incentives that are being phased out have driven renewable development. But experts say that even without these supports, the economics favor renewables. According to Lazard's analysis, the levelized cost of utility-scale solar and onshore wind remains "the most cost-effective form 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.
"Wind and solar don't have to generate 100% of the time because people don't consume all available electricity 100% of the time."
Beth Garza
Senior Fellow at R Street Institute, former CEO of ERCOT market monitoring
Recently, renewable trade organizations 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 approval processes to rising fuel prices and multi-year equipment backlogs. "The newest, most efficient natural gas peaker plants are expensive to build, and operating costs can be higher due to gas competition," Garza said. "The market's answer to load growth is still to build more wind, solar, and batteries because they are cheaper and faster to build."
Michelle Solomon, electricity policy manager at Energy Innovation, holds a similar view. Utility planning models "have basically been choosing wind, solar, and batteries for years," she said. "A diversified resource mix is most likely to be the cheapest combination."
