System Costs of Electricity: A New Baseline for the 21st Century Economy

This report examines whether widespread adoption of distributed energy resources (DERs), specifically rooftop solar PV and batteries, will make electricity more or less expensive for the economy as a whole. Using a Total System Costs model spanning 40,500 scenarios, the research combines the costs of DERs with centralized generation and grid costs. It finds that under current global-average cost conditions, optimized total system costs can fall 10% below the current benchmark and could fall as much as 40% below it at assumed 2030s DER cost levels. Current U.S. costs are an exception, with modeled optimal system costs about 20% above the benchmark. The analysis finds that lower system costs depend on coordinating DER deployment with growing electricity demand through electrification. Solar and batteries can reduce grid demand and create system headroom, while new electricity demand can fill that headroom and improve utilization of existing infrastructure. Poorly synchronized deployment can temporarily increase costs, but the report concludes that DERs combined with electrification can ultimately support a lower-cost electricity system. It identifies load-curve flattening, coordination of supply and demand, and development of DER supply chains as three policy priorities for enabling that transition.