What grid bottlenecks cost us

Last month we posted a Kiesling/Macey paper, which argued that perverse incentives for incumbents help keep energy supply constrained. A paper published last week by Dasom Ham, Owen Kay, and Catherine Hausman dovetails nicely with that post, providing more quantitative evidence for how those incentives are created. The authors find that eliminating some of the current constraints to moving energy would have reduced electricity generation costs in the continental US by roughly $3 - 5 billion in 2023 and $6 - 7 billion in 2022, when natural gas prices spiked. Better connections between energy supply (particularly in the renewables-rich interior of the country) and demand centers (primarily on the coast) would also help equalize prices, trimming revenues for coastal incumbent generators currently benefiting from their locational “advantage.”