How Grid Interconnectivity Impacts Energy Costs

For most of the last century, generators stabilised the grid as a by-product of producing energy. Today, we are building assets that stabilise the grid without producing energy at all. That shift identifies the binding constraint. Electricity system transition is no longer constrained by renewable resource availability. It is constrained by deliverability and operability. In inverter-dominated systems under rapid load growth, the binding constraints are: - transmission and major substation capacity - system strength, fault levels, frequency and voltage control - connection and commissioning throughput - secure operation under worst-day conditions - execution pace across networks and system services Generation capacity remains necessary. On its own, it no longer delivers firm supply or supports large new loads. Historically, synchronous generators supplied energy and stability together. Inertia, fault current, voltage support, and controllability were implicit. As synchronous plant retires, these services must be provided explicitly. Stability shifts from physics-led to control-led. System behaviour becomes more sensitive to modelling accuracy, protection coordination, control settings, and real-time visibility. Curtailment is not excess energy. It is a deliverability or security constraint. When transmission and substations lag generation, congestion and curtailment rise. Independent analysis shows that delay increases prices and emissions by extending reliance on higher-cost thermal generation. Distribution networks are no longer passive. They now host distributed generation, storage, EV charging, and large loads at the edge of transmission. Voltage control, protection coordination, hosting capacity, and connection throughput now constrain both decarbonisation and industrial growth. Firming is a hard requirement. Batteries provide fast frequency response and contingency arrest. They do not provide multi-day energy and do not replace networks or system strength in weak grids. Demand response reduces peaks. It cannot be relied upon for system-wide security under stress. Execution speed is critical. Slow delivery increases congestion duration, curtailment exposure, reserve requirements, and reliance on ageing plant. These effects flow directly into costs, emissions, and reliability. This is why electricity bills can rise even when average wholesale prices fall. Costs are driven by peak demand, contingencies, and security, not average energy. Large digital and industrial loads are transmission-scale, continuous, and failure-intolerant. They increase contingency size and correlation risk. At that scale, loads do not connect to the grid, they shape it. Supporting growth requires time-to-power, transmission and substation capacity in load corridors, explicit system strength and fault levels, operable firming under worst-day conditions, scalable connection and commissioning, and early procurement of long lead time HV equipment. #energy

"One of the key ways to make energy systems more reliable is by maximizing flexibility — improving how well the system can adapt in real time to changes in supply and demand. The more flexible the system, the better it can handle sudden demand spikes in the event of extreme weather, such as cold snaps or heat waves, or respond to supply disruptions such as plant outages. Improving flexibility includes upgrading aging infrastructure. Much of the U.S. grid was built decades ago under different demand patterns. Modernizing the grid — by updating substations and transmission equipment, deploying advanced sensors and incorporating advanced transmission technologies (ATTs), for example — can reduce failure rates during extreme heat and cold. These technologies help operators detect problems quicker, reroute power if equipment is damaged and restore service fast. Modernization not only improves reliability but also reduces expensive emergency interventions and lowers long-term maintenance costs. Increasing grid capacity, both through deployment of ATTs and building regional and interregional transmission lines, can reduce the risk of a local weather event turning into a widespread outage. Creating a more interconnected grid allows regions to share power during shortages. Having this greater transmission capacity also help keep prices down by allowing lower-cost electricity to reach areas facing higher demand. Demand-side management options can help ease pressure on the system during extreme weather events. These include encouraging customers and large users to reduce or shift electricity use during peak periods in exchange for lower bills or leveraging distributed energy resources to help prevent shortages. Systems that rely too much on a single fuel are more vulnerable to disruption. Diversification across energy sources and technologies helps reduce the risk of issues related to fuel shortages, infrastructure failures and localized weather impacts. Finally, policy is also critical. It’s vital that incentives are properly aligned with modern needs for flexibility and preparedness. This can help utilities make system investments that really work in extreme weather and minimize costs to consumers in both the short and the long run." Kelly Lefler World Resources Institute https://lnkd.in/e5syqXQp

“Why are you so obsessed with grids?” 🔌 It’s a fair question — even for the EU Energy Commissioner! My answer is simple: our energy infrastructure isn’t just the backbone of our energy system; it’s the backbone of Europe itself. Without a truly interconnected and integrated grid, Europe cannot deliver cleaner energy. It misses an opportunity to decrease energy prices. And ultimately, it cannot achieve real independence. Despite major progress in cross-border infrastructure and rapid growth in renewables, we still lack true interconnectivity among Member States, and efficient networks. The consequences are tangible: 🔸 Higher costs: Electricity prices remain 2–3 times higher than in the US. 🔸 Wasted potential: Up to 310 TWh of renewable energy could go unused by 2040 — this is nearly half of Europe’s electricity consumption in 2023! But the benefits of action are equally clear: 🔹 Better market integration could deliver €40 billion in annual cost savings.  🔹 Boosting cross-border electricity trade by 50% could increase EU GDP by €18 billion in 2030. 🔹 Investing €2 billion annually by 2030 in 64 GW of cross-border reinforcements could generate €5 billion in socio-economic gains each year. So yes — I’m obsessed with grids. 🤓⚡ Because investing in grids means investing in Europe’s future. Let’s enable the winds of the North and the sun of the South to power homes, businesses, and communities across the continent with clean, affordable, and secure energy. Let’s build a truly interconnected #EnergyUnion — and unlock the full power of Europe! #RenewableEnergy #EnergyGrids #SustainableFuture #FutureofEnergy

If we are looking for the genesis of the UK’s high #electricity costs at the socket, I think it can be found in the image below. A 2015 letter from the then Energy Minister to Ofgem is a serious underestimation of the requirement to invest in the #grid ahead of new build #electricity generation from distributed #renewables. It explicitly acknowledged that the ‘Connect and Manage’ regime designed to accelerate #renewable connections risked higher constraint costs if #grid reinforcement lagged behind generation build-out. Fast forward to today, and constraint management has ballooned from a theoretical risk into a multi-billion-pound annual cost borne by consumers. Curtailing low-cost #renewables in constrained regions while running higher-cost #gas peakers close to southern loads is now a structural feature of the system, not a temporary blip. The UK rightly prioritised rapid #decarbonisation of #power generation, but failed to move transmission reinforcement at the same pace. The 2015 correspondence shows this risk was understood at the time, yet #grid investment, planning reform and anticipatory build consistently lagged behind policy ambition. In effect, we traded: ⚡️Faster connections in the short term for ⚡️Rising congestion, curtailment and balancing costs in the long term A more coordinated approach aligning #netzero targets, network planning and regulatory incentives would almost certainly have reduced today’s scale of constraint and imbalance costs. The lesson is clear - you can’t #decarbonise at speed using a #grid designed for an era of centralised, unabated #fossilfuel generation. The problem isn’t #renewables; it’s poor sequencing and the absence of a whole-system approach.

⚡U.S. Power Exports: The Hidden Infrastructure Behind Real Estate Markets America’s power grid is more connected than most realize. Roughly 5% of all U.S. electricity is traded between regions each year, balancing supply and demand, stabilizing prices, and keeping the grid resilient. Top Export Regions (2024) ✅Mid-Atlantic: 38,809 GWh to the Midwest, 16,820 GWh to NY ✅Southwest: 26,712 GWh to California ✅Northwest: 11,500 GWh to California, 8,569 GWh to Canada ✅Midwest: 16,562 GWh to Tennessee ✅Southeast: 8,543 GWh to Carolinas California remains one of the largest importers, relying on hydro from the Northwest and solar from the Southwest to serve nearly 40 million residents. Massive interregional lines like the Pacific DC Intertie and PJM–Southeast Interfaces make these trades possible. 🏙️ Why It Matters for Real Estate 1️⃣ Energy Cost & Stability Regions dependent on imports often see higher peak rates and volatility. For multifamily and industrial owners, this directly affects NOI and operating expenses. 2️⃣ Data Centers & Electrification Electricity-exporting corridors, Mid-Atlantic to Midwest, Southwest to California, offer transmission headroom for high-load uses like data centers and EV infrastructure. 3️⃣ Investment Insight When underwriting markets, grid topology matters. Areas with redundant transmission and net export capacity tend to have stronger resilience and predictable operating costs, key for long-term asset value. 🔍 As energy transitions accelerate, power trading is becoming a new layer of location intelligence. Understanding who exports, who imports, and how stable those flows are could soon be as important as jobs, transit, or schools in real estate underwriting. 📊 Source: Orennia (Aaron Foyer), U.S. Energy Information Administration (EIA) #RealEstate #PropTech #EnergyMarkets #Infrastructure #GridResilience #Multifamily #DataCenters #RenewableEnergy #MarketIntelligence #EnergyTransition

Renewable energy paradox: Why electricity bills keep rising even as solar and wind generation costs plummet—and what this reveals about our energy system's true economics 🔌 As markets around the world integrate more renewable energy, consumers are noticing something counterintuitive: despite solar and wind now being the cheapest forms of new electricity generation, their monthly bills aren't falling. In some high-renewable regions, prices are even increasing. This disconnect isn't evidence that renewable energy is failing—it's revealing fundamental truths about our electricity system that have always existed but were less visible in the era of centralized fossil generation. Let's examine the principles that explain this apparent contradiction: 1. Generation Is Only Part of Your Bill • The cost to produce electricity (generation) typically represents just 30-40% of a consumer's total bill • Transmission, distribution, grid services, and utility returns make up the majority • Even if generation costs fell to zero, your bill would only decrease by a fraction • Renewables primarily impact the generation portion, leaving other cost components unchanged or increasing 2. System Architecture Is Transforming • Our grid was designed around large, centralized power plants located near population centers or fuel sources • Renewable resources must be built where it's consistently sunny or windy—often far from demand • This geographical mismatch requires significant investment in new transmission infrastructure • Transmission projects are expensive, face regulatory hurdles, and their costs are passed to ratepayers 3. Intermittency Requires New Solutions • Traditional grids match supply and demand in real-time • Variable renewable generation requires additional balancing resources • Storage technologies (batteries, pumped hydro) add essential flexibility but at additional cost • As we integrate more renewables, these balancing costs become more significant We can see these principles at work in any market with high renewable penetration. Regions with better transmission interconnections between diverse resource areas consistently show more stable prices than isolated systems, regardless of how much renewable capacity they build. The core insight is that focusing solely on the levelized cost of energy (LCOE) for different generation types misses the system-wide changes required by the energy transition. This isn't a flaw of renewable energy itself—it's a reflection of the comprehensive infrastructure modernization needed to accommodate any major shift in how we generate electricity. #EnergyEconomics #GridTransition #ElectricityPrices #RenewableIntegration

Often, the link between data centers, rising power demand, and retail electricity prices is oversimplified. This excellent PBS News Hour segment and recent analyses from Lawrence Berkeley National Lab (LBNL) and The Brattle Group demonstrates that the relationship is far more nuanced and, in some instances, optimistic. Data centers and industrial load growth can actually help lower electricity prices by spreading fixed grid costs such as transmission, distribution, and modernization, across a larger user base. When utilities already have unused capacity, adding large, steady loads improves asset utilization and can reduce per-unit costs for everyone. On the other hand, the real culprits behind rising rates are aging grid assets, escalating equipment costs, extreme weather events, and the massive investments required for reliability and resilience. States with strong data center growth have often seen stable or even declining electricity prices, while states with stagnant or shrinking demand have experienced the opposite where higher rates are driven by declining utilization of fixed infrastructure. As for renewables, when paired with flexible data center demand, renewable generation can prosper. Large, predictable loads can anchor new solar and wind projects, improve financing, and accelerate decarbonization. With smart grid design (workload shifting, on-site storage, and dynamic pricing) data centers can act as balancing agents instead of just consumers. However, when demand is inflexible or poorly located, it can strain constrained transmission zones and drive localized price spikes. The next decade of energy policy and infrastructure strategy will be heavily focused on: ➡️ How we align digital growth with grid modernization ➡️ How flexible load becomes a resource ➡️ What new models of utility partnership, tariff design, and market structure will unlock shared value PBS News: How Data Center Power Demand Could Help Lower Electricity Prices https://lnkd.in/gMQzyB4h #GridModernization #DataCenters #Energy #Decarbonization #LoadGrowth #RenewableEnergy #PowerMarkets #EnergyPolicy #Power #Infrastructure

The U.S. #energy sector faces a critical bottleneck as renewable energy projects surge: the grid connection process. A Berkeley Lab article highlights these growing challenges, particularly for #solar, #wind, and #batterystorage. By the end of 2023, grid connection requests reached over 2,600 GW, more than double the capacity of the current U.S. power plant fleet, with renewables comprising 95% of proposed capacity. TO no ones surprise, the interconnection process is increasingly slow and expensive. Projects spend 70% more time in queues compared to a decade ago, with about 80% being withdrawn due to delays and financial hurdles. Costs have risen significantly, with renewable projects often facing interconnection costs making up 30-37% of total project expenses when withdrawn, compared to 6-8% for completed projects. To better understand these dynamics, Berkeley Lab compiled data from over 11,000 active projects seeking grid connection and cost data from more than 5,000 projects. The findings reveal renewable energy projects face higher interconnection costs than fossil fuels, significant geographic cost variations, and challenges with as-available service requests, which are often more expensive than expected. Much of the cost stems from network upgrades, typically borne by project developers. Berkeley Lab suggests reforms to address these barriers. Improved transparency in interconnection data could aid decision-making and navigation. Reassigning upgrade costs to consumers or adopting an average interconnection fee model may offer upfront cost certainty. Operational strategies like “connect and manage,” employed in Texas and the U.K., and technological advancements such as on-site batteries and grid-enhancing technologies, could reduce interconnection costs. The U.S. Department of Energy (DOE) of Energy’s Transmission Interconnection Roadmap outlines further solutions for clearing the backlog and integrating renewable energy. Federal Energy Regulatory Commission orders also seek to improve generator interconnection and transmission planning. Berkeley Lab’s findings underscore the urgent need for comprehensive reforms to facilitate the #renewable energy transition. Transparent data, cost management, and technological advancements are essential to overcoming grid connection barriers and ensuring a reliable, sustainable, and affordable energy future

Now out: our latest paper (pre-print) A study on cross-border "cannibalization" of wind and solar energy https://lnkd.in/ebPCdA5m It is now well established theoretically and empirically that the market revenues of wind and solar energy tend to decline as their market share grows. I call this the "market value drop". (Actually, I wrote my very first paper about this: https://lnkd.in/eFtNgpfR) In this paper, we use 2015-23 empirical data in monthly granularity. We see a drop in wind and solar market value (capture rates) in almost all European bidding zones. We are particularly interested in the role of imports and exports as a source of power system flexibility. Many EU bidding zones are *really* well interconnected, with import/export capacity >>100% of their average electricity demand. My favorite results figure shows the impact of domestic wind (dark) and neighbouring wind (light) as a function of my own interconnectedness. If I have no interconnectors, domestic wind depresses market value strongly. Interconnection dampens this effect. However, there is a downside to this: with more interconnectors, the impact of my neighbour's wind on my own value factor becomes stronger. We have tons of more interesting findings. For example: If wind market share increases by 1 pp in Europe, the capture rate drops by about 1.1 pp. This is the combined effect of domestic (0.6) and cross-border (0.5) cannibalization. Many thanks for the great work: Clemens Stiewe, Alice Lixuan Xu, Anselm Eicke! This has been a long haul, but I am pretty proud of how far we got with this! https://lnkd.in/ebPCdA5m

⚡Yesterday saw significant volatility in GB power prices, which dipped into negative territory during the early afternoon before reaching over 110 GBP/MWh in the evening. This fluctuation was primarily driven by the dynamics of renewable generation and demand.   ☀️In the afternoon, the abundance of renewable energy led to excess supply, greatly reducing GB power prices and prompting our North Sea Link to export electricity to Norway. However, as GB demand increased in the evening and solar generation reduced, the situation reversed, and our Norwegian interconnector switched direction to bring power into GB.   ⚖️This scenario highlights the importance and flexibility of interconnectors. They play a crucial role in balancing the system, by exporting surplus energy when generation outstrips demand, and importing energy when demand peaks. This adaptability not only ensures grid stability, but also helps to keep prices down for GB consumers and consumers at the other side of interconnector, in this case, Norway. A win-win for both countries. #interconnectors #netzero #flexibility #REMA #energy #electricty #markets