All FSI Publications Working Papers Program on Energy and Sustainable Development

Financing the Energy Transition in a Low-Cost Intermittent Renewables Environment

November 7, 2021

Declines in the up-front costs of both wind and solar generation units over the past decide has significantly closed the gap between the levelized cost of energy (LCOE) for these resources and the LCOE of natural gas and coal-fired generation. This outcome has the potential to reduce the cost of increasing the share of intermittent renewable resources in a region significantly. The experience of regions with significant shares of intermittent renewables is used to provide recommendations for short-term wholesale market design, a long-term resource adequacy mechanism and a renewables support mechanism to achieve a substantial intermittent renewable energy share at least cost to electricity consumers. A multi-settlement locational marginal pricing short-term market design, a standardardized fixed-price forward contract approach to long-term resource adequacy and a renewables energy certificates market are the major market design elements proposed to achieve this goal.