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Jesse gives Rob a lesson in marginal generation, inframarginal rent, and electricity supply curves.
Most electricity used in America today is sold on a wholesale power market. These markets are one of the most important institutions structuring the modern U.S. energy economy, but they’re also not very well understood, even in climate nerd circles. And after all: How would you even run a market for something that’s used at the second it’s created — and moves at the speed of light?
On this week’s episode of Shift Key Summer School, Rob and Jesse talk about how electricity finds a price and how modern power markets work. Why run a power market in the first place? Who makes the most money in power markets? How do you encourage new power plants to get built? And what do power markets mean for renewables?
Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: If I’m just a utility operating on my own, I want to basically run my fleet on what we call economic dispatch, which is rank ordering them from cheapest to most expensive on a fuel or variable cost basis, and trying to maximize my use of the less expensive generators and only turn on the more expensive generators when I need them.
That introduces this idea of a marginal generator, where the marginal generator is the last one I turned on that has some slack to move up or down as demand changes. And what that means is that if I have one more megawatt-hour of demand in that hour — or over a five-minute period, or whatever — or 1 megawatt-hour less, then I’m going to crank that one generator up or down. And so the marginal cost of that megawatt-hour of demand is the variable cost of that marginal generator. So if it’s a gas plant that can turn up or down, say it’s $40 a megawatt-hour to pay for its fuel, the cost on the margin of me turning on my lights and consuming a little bit more is that that one power plant is going to ramp its power up a little bit, or down if I turn something off.
And so the way we identify what the marginal value of supplying a little bit more electricity or consuming a little bit more electricity is the variable cost of that last generator, not the average cost of all the generators that are operating, because that’s the one that would change if I were to increase or decrease my output.
Does that make any sense?
Robinson Meyer: It does. In other words, the marginal cost for the whole system is a property of the power plant on the margin, which I realize is tautological. But basically, the marginal cost for increasing output for the entire system by 1 megawatt-hour is actually a property of the one plant that you would turn on to produce that megawatt-hour.
Jesse Jenkins: That’s right, exactly. And that can change over the course of the day. So if demand’s really high, that might be my gas plant that’s on the margin. But if demand is low, or in the middle of the day, that gas plant might be off, and the marginal generator during those periods might be the coal plant or even the nuclear plant at the bottom of the supply curve.
Mentioned:
Jesse’s slides on electricity pricing in the short run
Jesse’s lecture slides on electricity pricing in the long run
Shift Key Summer School episodes 1, 2, and 3
This episode of Shift Key is sponsored by …
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Join clean energy leaders at RE+ 25, September 8–11 in Las Vegas. Explore opportunities to meet rising energy demand with the latest in solar, storage, EVs, and more at North America’s largest energy event. Save 20% with code HEATMAP20 at re-plus.com.
Music for Shift Key is by Adam Kromelow.
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A judge has lifted the administration’s stop-work order against Revolution Wind.
A federal court has lifted the Trump administration’s order to halt construction on the Revolution Wind farm off the coast of New England. The decision marks the renewables industry’s first major legal victory against a federal war on offshore wind.
The Interior Department ordered Orsted — the Danish company developing Revolution Wind — to halt construction of Revolution Wind on August 22, asserting in a one-page letter that it was “seeking to address concerns related to the protection of national security interests of the United States and prevention of interference with reasonable uses of the exclusive economic zone, the high seas, and the territorial seas.”
In a two-page ruling issued Monday, U.S. District Judge Royce Lamberth found that Orsted would presumably win its legal challenge against the stop work order, and that the company is “likely to suffer irreparable harm in the absence of an injunction,” which led him to lift the dictate from the Trump administration.
Orsted previously claimed in legal filings that delays from the stop work order could put the entire project in jeopardy by pushing its timeline beyond the terms of existing power purchase agreements, and that the company installing cable for the project only had a few months left to work on Revolution Wind before it had to move onto other client obligations through mid-2028. The company has also argued that the Trump administration is deliberately mischaracterizing discussions between the federal government and the company that took place before the project was fully approved.
It’s still unclear at this moment whether the Trump administration will appeal the decision. We’re still waiting on the outcome of a separate legal challenge brought by Democrat-controlled states against Trump’s anti-wind Day One executive order.
Harmonizing data across federal agencies will go a long, long way toward simplifying environmental reviews.
Comprehensive permitting reform remains elusive.
In spite of numerous promising attempts — the Fiscal Responsibility Act of 2023, for instance, which delivered only limited improvements, and the failed Manchin-Barrasso bill of last year — the U.S. has repeatedly failed to overhaul its clogged federal infrastructure approval process. Even now there are draft bills and agreements in principle, but the Trump administration’s animus towards renewable energy has undermined Democratic faith in any deal. Less obvious but no less important, key Republicans are quietly disengaged, hesitant to embrace the federal transmission reform that negotiators see as essential to the package.
Despite this grim prognosis, Congress could still improve implementation of a key permitting barrier, the National Environmental Policy Act, by fixing the federal government’s broken systems for managing and sharing NEPA documentation and data. These opaque and incompatible systems frustrate essential interagency coordination, contributing immeasurably to NEPA’s delays and frustrations. But it’s a problem with clear, available, workable solutions — and at low political cost.
Both of us saw these problems firsthand. Marc helped manage NEPA implementation at the Environmental Protection Agency, observing the federal government’s slow and often flailing attempts to use technology to improve internal agency processes. Elizabeth, meanwhile, spent two years overcoming NEPA’s atomized data ecosystem to create a comprehensive picture of NEPA litigation.
Even so, it’s difficult to illustrate the scope of the problem without experiencing it. Some agencies have bespoke systems to house crucial and unique geographic information on project areas. Other agencies lack ready access to that information, even as they examine project impacts another agency may have already studied. Similarly, there is no central database of scientific studies undertaken in support of environmental reviews. Some agencies maintain repositories for their environmental assessments — arduous but less intense environmental reviews than the environmental impact statements NEPA requires when a federal agency action substantially impacts the environment. But there’s still no unified, cross-agency EA database. This leaves agencies unable to efficiently find and leverage work that could inform their own reviews. Indeed, agencies may be duplicating or re-duplicating tedious, time-consuming efforts.
NEPA implementation also relies on interagency cooperation. There, too, agencies’ divergent ways of classifying and communicating about project data throws up impediments. Agencies rely on arcane data formats and often incompatible platforms. (For the tech-savvy, an agency might have a PDF-only repository while another has XML-based data formats.) With few exceptions, it’s difficult for cooperating agencies to even know the status of a given review. And it produces a comedy of errors for agencies trying to recruit and develop younger, tech-savvy staff. Your workplace might use something like Asana or Trello to guide your workflow, a common language all teams use to communicate. The federal government has a bureaucratic Tower of Babel.
Yet another problem, symptomatic of inadequate transparency, is that we have only limited data on the thousands of NEPA court cases. To close the gap, we sought to understand — using data — just how sprawling and unwieldy post-review NEPA litigation had become. We read every available district and appellate opinion that mentioned NEPA from 2013 to 2022 (over 2,000 cases), screened out those without substantive NEPA claims, and catalogued their key characteristics — plaintiffs, court timelines and outcomes, agencies, project types, and so on. Before we did this work, no national NEPA litigation database provided policymakers with actionable, data-driven insights into court outcomes for America’s most-litigated environmental statute. But even our painstaking efforts couldn’t unearth a full dataset that included, for example, decisions taken by administrative judges within agencies.
We can’t manage what we can’t measure. And every study in this space, including ours, struggles with this type of sample bias. Litigated opinions are neither random nor representative; they skew toward high-stakes disputes with uncertain outcomes and underrepresent cases that settle on clear agency error or are dismissed early for weak claims. Our database illuminates litigation patterns and timelines. But like the rest of the literature, it cannot offer firm conclusions about NEPA’s effectiveness. We need a more reliable universe of all NEPA reviews to have any chance — even a flawed one — at assessing the law’s outcomes.
In the meantime, NEPA policy debates often revolve unproductively around assumptions and anecdotes. For example, Democrats can point to instances when early and robust public engagement appeared essential for bringing projects to completion. But in the absence of hard data to support this view, GOP reformers often prefer to limit public participation in the name of speeding the review process. The rebuttal to that approach is persuasive: Failing to engage potential project opponents on their legitimate concerns merely drives them to interfere with the project outside the NEPA process. Yet this rebuttal relies on assumptions, not evidence. Only transparent data can resolve the dispute.
Some of the necessary repair work is already underway at the Council on Environmental Quality, the White House entity that coordinates and guides agencies’ NEPA implementation. In May, CEQ published a “NEPA and Permitting Data and Technology Standard” so that agencies could voluntarily align on how to communicate NEPA information with each other. Then in June, after years using a lumbering Excel file containing agencies’ categorical exclusions — the types of projects that don’t need NEPA review, as determined by law or regulation — CEQ unveiled a searchable database called the Categorical Exclusion Explorer. The Pacific Northwest National Laboratory’s PermitAI has leveraged the EPA’s repository of environmental impact statements and, more recently, environmental review documents from other agencies to create an AI-powered queryable database. The FAST-41 Dashboard has brought transparency and accountability to a limited number of EISs.
But across all these efforts, huge gaps in data, resources, and enforcement authority remain. President Trump has issued directives to agencies to speed environmental reviews, evincing an interest in filling the gaps. But those directives don’t and can’t compel the full scope of necessary technological changes.
Some members of Congress are tuned in and trying to do something about this. Representatives Scott Peters, a Democrat from California, and Dusty Johnson, Republican of South Dakota, deserve credit for introducing the bipartisan ePermit Act to address all of these challenges. They’ve identified key levers to improve interagency communication, track litigation, and create a common and publicly accessible storehouse of NEPA data. Crucially, they recognize the make-or-break role of agency Chief Information Officers who are accountable for information security. Our own attempts to upgrade agency technology taught us that the best way to do so is by working with — not around — CIOs who have a statutory mandate.
The ePermit Act would also lay the groundwork for more extensive and innovative deployment of artificial intelligence in NEPA processes. Despite AI’s continuing challenges around information accuracy and traceability, large language models may eventually be able to draft the majority of an EIS on their own, with humans involved to oversee.
AI can also address hidden pain points in the NEPA process. It can hasten the laborious summarization and incorporation of public comment, reducing the legal and practical risk that agencies miss crucial public feedback. It can also help determine whether sponsor applications are complete, frequently a point of friction between sponsors and agencies. AI can also assess whether projects could be adapted to a categorical exclusion, entirely removing unnecessary reviews. And finally, AI tools are a concession to the rapid turnover of NEPA personnel and depleted institutional knowledge — an acute problem of late.
Comprehensive, multi-agency legislation like the ePermit Act will take time to implement — Congress may want or even need to reform NEPA before we get the full benefit of technology improvements. But that does not diminish the urgency or value of this effort. Even Representative Jared Huffman of California, a key Democrat on the House Natural Resources Committee with impeccable environmental credentials, offered words of support for the ePermit Act, while opposing other NEPA reforms.
Regardless of what NEPA looks like in coming years, this work must begin at some point. Under every flavor of NEPA reform, agencies will need to share data, coordinate across platforms, and process information. That remains true even as court-driven legal reforms and Trump administration regulatory changes wreak havoc with NEPA’s substance and implementation. Indeed, whether or not courts, Congress, or the administration reduce NEPA’s reach, even truncated reviews would still be handicapped by broken systems. Fixing the technology infrastructure now is a way to future-proof NEPA.
The solution won’t be as simple as getting agencies to use Microsoft products. It’s long past time to give agencies the tools they need — an interoperable, government-wide platform for NEPA data and project management, supported by large language models. This is no simple task. To reap the full benefits of these solutions will require an act of Congress that both provides funding for multi-agency software and requires all agencies to act in concert. This mandate is necessary to induce movement from actors within agencies who are slow to respond to non-binding CEQ directives that take time away from statutorily required work, or those who resist discretionary changes to agency software as cybersecurity risks, no matter how benign those changes may be. Without appropriated money or congressional edict, the government’s efforts in this area will lack the resources and enforcement levers to ensure reforms take hold.
Technology improvements won’t cure everything that ails NEPA. This bill won’t fix the deep uncertainty unleashed by the legal chaos of the last year. But addressing these issues is a no-regrets move with bipartisan and potentially even White House support. Let it be done.
On Guyana’s climate ‘morality,’ New Jersey’s energy fight, climate hybrids
Current conditions: Tropical Storm Gabrielle is gaining intensity as it tracks northward near Bermuda • Thunderstorms from Tropical Storm Mario threaten floods in the American Southwest, particularly in areas scarred by wildfire • China is bracing for Typhoon Ragasa, which could bring winds of up to 137 miles per hour.
The Italian oil giant Eni announced a deal Monday morning to buy more than $1 billion worth of electricity from Commonwealth Fusion Systems’ debut power plant in Chesterfield, Virginia. It’s the Massachusetts Institute of Technology spinoff’s second major power-purchase agreement since signing its debut contract with Google in July, part of a large deal Eni described as a “strategic collaboration.” The companies did not disclose the terms of the broader contract. “It is a big vote of confidence to have Eni, who has contributed to our execution since the beginning, buy the power we intend to make in Virginia,” Bob Mumgaard, the chief executive of Commonwealth Fusion, said in a statement. “Our fusion power attracts diverse customers across the world — from hyperscalers to traditional energy leaders — because of the promise of clean, almost limitless energy.”
The U.S. is pushing hard to commercialize fusion energy. At least one company, the Microsoft-backed Helion, aims to generate its first electricity for the grid as early as 2028. But Commonwealth Fusion, which is aiming for the 2030s, has raised a third of all the private capital invested into fusion energy so far. Though fusion hopefuls have been burned before, the investment boom is a sign that, as Heatmap’s Katie Brigham wrote last year, “it is finally, possibly, almost time for fusion.”
The United Nations General Assembly has convened in New York City. With wars raging in Ukraine, Sudan, and Gaza, and Western powers such as the United Kingdom and Australia granting official recognition to the state of Palestine, climate change is likely to take a backseat outside of the New York Climate Week panels, conferences, and happy hours that take place across the city alongside the UN gathering.
The U.S. has dramatically reversed its public diplomacy on climate change since President Donald Trump returned to office. While the European Union has remained largely committed to its goals, the bloc could not find enough consensus to pass a binding climate plan ahead of the UN meeting. Instead, the 27 nations signed onto a “statement of intent,” in what the Financial Times called “a blow to hopes of EU leadership” in advance of November’s big UN climate summit, COP30, in Brazil.
Guyanese President Irfaan Ali. Riccardo Savi/Getty Images for Concordia Summit
A year ago, the leader of Guyana went viral for a BBC segment in which he lambasted a British journalist for daring to lecture his tiny South American nation about climate change when his country has more carbon-absorbing forests than people, and Britain grew rich long ago felling its old-growth trees. In an interview in The New York Times series with world leaders published this past weekend ahead of the UN General Assembly, Guyana President Irfaan Ali delivers a similarly strident rebuke of critics in the rich world who oppose his country’s embrace of Exxon Mobil’s offshore drilling. “The moral question is: Who can produce what the world needs in the least environmentally damaging way? Because let’s be clear on this, too. We can’t be naïve. The world will need fossil fuel a long time into the future,” he said.
But that doesn’t mean Guyana is going all in on using fossil fuels at home. “Guyana is a new oil producer, but we are using the resource to finance our energy transition, to build resilient infrastructure, to support the region that we are in, to invest in livelihood options that will keep our forest standing, which stores many gigatons of carbon,” Ali said. “We’re investing in solar farms, hydro, natural gas, wind and biomass, all aimed at transitioning to a low-emission energy grid. We are building off-grid systems, solar farms, wind farms for the hinterland community, where the Indigenous people live.”
Republicans overhauled federal energy policy with the last budget legislation that became the One Big Beautiful Bill Act. At the moment they’re deep in negotiations over a new spending bill to forestall a government shutdown on October 1. But Congress is also already looking ahead to a possible second reconciliation bill in the fall — though that is unlikely to say much of anything about energy, according to E&E News. House Budget Committee Chair Jodey Arrington, a representative from Texas, said the first reconciliation bill “exhausted” the possibilities for energy reforms and left little “meat on the bones.” Senate Environment and Public Works Committee Chair Shelley Moore Capito, a West Virginia Republican, said energy policy would “be interesting if it develops,” but said “it’s not developing now.” Some in the clean energy world had hoped a second reconciliation bill would be a chance for moderate Republicans with a lot of wind and solar in their states to quietly reverse anti-renewables policies that made it into law in the OBBB Act. But avoiding the issue might keep more punitive policies at bay, including a Republican proposal to add new fees on electric vehicles.
Energy prices are a central theme of New Jersey’s gubernatorial race as Democrat Mikie Sherrill has repeatedly vowed to pressure the state’s regional grid operator over utility rates that surged 20% this year, and even build new nuclear reactors to meet growing demand for power. At her first televised debate Sunday night with Republican Jack Ciattarelli, Sherrill slammed the Trump administration’s cuts to renewable energy and vowed to take on utilities and the PJM Interconnection, the nation’s largest grid operator, which serves New Jersey. “Everbody at the table is at fault, and they keep dumping the costs onto the ratepayer here in New Jersey,” she said, according to a CNN transcript. “Let’s face it, some of our utility companies have made over a billion dollars in profits, and yet our ratepayers are constantly suffering.”
Ciattarelli instead blamed renewables for the high prices, a claim the data in this piece by Heatmap’s Matthew Zeitlin seriously undercuts. “Nobody wants wind farms on our Jersey Shore,” Ciattarelli asserted, and vowed to pull out of the Regional Greenhouse Gas Initiative, the interstate carbon-trading market in the Northeast. But his solutions didn’t sound so far off from the Democrat’s, including promises to “expand our nuclear footprint in South Jersey” and “accelerate solar on rooftops.”
Maybe call it a teal jay? Biologists at the University of Texas at Austin reported the discovery of a bird formed naturally by a green jay and a blue jay mating in the wild, marking one of the first documented examples of hybrid species created due to changing climate patterns. The two different parent species are separated by 7 million years of evolution, and their migratory ranges only recently started to overlap. “We think it’s the first observed vertebrate that’s hybridized as a result of two species both expanding their ranges due, at least in part, to climate change,” Brian Stokes, a graduate student researching ecology and evolution and first author of the study, said in a press release.