Work

Transmission lowers US generation costs, but generator incentives are not aligned

Year: 2026

Type: article

Abstract: The US electricity grid is rapidly evolving with the entry of low-cost renewable electricity. As a result, new supply is not spatially matched to demand, and the transmission network has become more strained. Better market integration could thus lower US generation costs. We document that eliminating interregional constraints would have reduced electricity generation costs across the lower US 48 states by $5.8 to 7.1 billion in 2022 and $3.4 to 5.0 billion in 2023. But market integration creates winners and losers among generation companies, and we show that producers in some regions have incentives to delay or block grid integration despite the overall system benefits.

Source: Proceedings of the National Academy of Sciences

DOI: 10.1073/pnas.2524463123

Authors: Dasom Ham, Owen Kay, Catherine Hausman

Institutions: University of Michigan, Federal Reserve Bank of Dallas

Language: English

Topic: Electric Power System Optimization

Subfield: Electrical and Electronic Engineering

Field: Engineering

Domain: Physical Sciences

SDGs: Affordable and clean energy, Industry, innovation and infrastructure, Climate action

Open Access status: hybrid

Funder: Resources for the Future