3 Ways Wind and Solar Can Continue To Grow In a 21st-Century Grid

This briefing by RMI argues that concerns regarding the economic limitations of wind and solar growth—specifically the 'merit order effect' where variable renewables depress wholesale prices—are based on static models that ignore supply-side evolution, demand flexibility, and storage technologies.

• Critics argue that variable renewables, particularly solar PV, create excess supply during specific times of day, leading to a 'duck curve' in demand. This creates a 'merit order effect' where a glut of low-marginal-cost renewable power lowers wholesale market prices, potentially reducing profits for both fossil fuel generators and the renewables themselves.
• The perceived economic limits of renewables can be mitigated by a holistic supply-side approach. The simultaneous integration of solar PV, wind, and dispatchable natural gas can address the 'duck curve,' while the retirement of uneconomic, high-compliance-cost legacy plants may contract the marginal supply curve and support higher wholesale prices.
• Demand-side flexibility allows consumers to shift electricity usage to periods of high renewable production through time-varying pricing programs and flexible appliances (such as electric vehicles and water heaters). This shift reduces peak prices and increases the value paid to renewable generators during their peak production hours.
• Energy storage transforms variable renewables into dispatchable resources, reducing the merit order effect. Examples include the use of batteries as replacements for peaking generation and the use of thermal or electrical storage in Chilean auctions to provide nighttime solar power at $97/MWh.
• Current wholesale power markets are based on 20th-century paradigms of competing thermal plants. Updating market designs to incorporate flexible loads and behind-the-meter distributed energy resources—as seen in New York and California—can better align incentives for least-cost resource mixes.

APA

RMI (2015). 3 Ways Wind and Solar Can Continue To Grow In a 21st-Century Grid. https://rmi.org/resources/3-ways-wind-solar-can-continue-grow-21st-century-grid/

Chicago

RMI. 3 Ways Wind and Solar Can Continue To Grow In a 21st-Century Grid. 2015. https://rmi.org/resources/3-ways-wind-solar-can-continue-grow-21st-century-grid/.

Wikipedia

{{cite report |author=RMI |title=3 Ways Wind and Solar Can Continue To Grow In a 21st-Century Grid |date=30 November 2015 |url=https://rmi.org/resources/3-ways-wind-solar-can-continue-grow-21st-century-grid/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2015ways, author = {{RMI}}, title = {{3 Ways Wind and Solar Can Continue To Grow In a 21st-Century Grid}}, institution = {RMI}, year = {2015}, month = nov, url = {https://rmi.org/resources/3-ways-wind-solar-can-continue-grow-21st-century-grid/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }