A diverse energy mix including coal and nuclear power is a key requirement for US electricity generation if the country is to maintain a cost-effective power supply, IHS Markit said Tuesday.
The analytical firm warned Tuesday "policy-driven market distortions" are creating a less efficient power supply that could cost the US economy 0.8% of gross domestic product and 1 million jobs.
The current diversified nature of the electricity supply lowers production costs by $114 billion a year and cuts retail prices by 27%, IHS Markit said in a report. However, the current direction of investment suggests "some US power systems will have no meaningful contributions from coal or nuclear resources and a smaller contribution from hydroelectric resources."
IHS Markit noted power systems will increasing rely on natural gas-fired resources and a tripling of renewable energy such as wind and solar from the current 7% contribution.
The federal Energy Information Administration forecast coal will retake the top spot in US power generation from gas in 2018 with a market share of 32% compared with 31% for gas. But the longer-term outlook suggests natural gas will come to dominate the US grid, supported by a boost in renewable energy.
In the International Energy Outlook published Thursday, the EIA estimated gas production in the US will grow 20% between 2015 and 2040.
The IHS Markit report pointed to the cost savings of a diverse supply of generation fuels to keep the lights on when renewables or gas are unavailable or more expensive. IHS Markit claims the current portfolio saves the US economy $158 billion a year as well as reducing variability in monthly electricity bills for consumers by 22%.
"We believe competitive electricity market rules should promote a balanced energy mix and recognize the role that all generation sources play in maintaining the reliability and resiliency of the energy grid," said Phil Moeller, the Edison Electric Institute's executive vice president of business operations and regulatory affairs, in a statement related to the IHS Markit report. "Additionally, wholesale electricity markets should address price formation and the valuation of essential reliability services for customers," he said.
