According to a study from the Lawrence Berkeley National Laboratory (LBNL) published last week, the decreasing costs of solar and wind power in the United States are failing to translate into lower energy bills for consumers due to existing market and contractual frameworks.
The study evaluates the “net market value” of utility-scale solar and wind energy, which compares the cost of replacing this renewable energy through wholesale markets with its levelized cost (LCOE). As solar and wind LCOEs continue to decline and wholesale market prices show considerable volatility, the study found improved net market values for these renewable sources in recent years. In 2022, solar provided a net value of $2.1 billion, with wind contributing $100 million.
Despite potential savings, the report highlights that whether consumers benefit through reduced bills depends largely on contractual agreements and the sophistication of energy purchasers. Long-term power purchase agreements (PPAs) with fixed prices typically pass on savings to consumers, whereas fixed-price unbundled renewable energy certificates (RECs) may not fully reflect the cost-saving benefits of solar and wind.
The LBNL report suggests that evolving contracting practices could better ensure that residential customers and other end-users capture these economic benefits. It recommends exploring contract structures such as physical and virtual PPAs, as well as index-based REC contracts, which could potentially pass on cost savings when wholesale prices rise.
The publication of this LBNL study follows a related report by Lazard, which noted a narrowing range of LCOEs across various electricity generation types in the U.S.
The full report, titled ‘Grid Value and Cost of Utility-Scale Wind and Solar: Potential Implications for Consumer Electricity Bills,' can be accessed here.
