The Market Use Case for Solar + Storage Serving as a Mid-Merit Asset

Abstract

Executive Summary In recent years, solar-plus-storage (S+S) systems have become increasingly cost-effective and are now emerging as a promising alternative to natural gas combined cycle (NGCC) plants—particularly for “mid-merit” power, which plays a crucial role in balancing supply and demand throughout the day. With U.S. electricity demand projected to rise over the next decade due to data center expansion, AI adoption, and industrial electrification, the need for clean, flexible mid-merit generation is more important than ever. At the same time, efforts to decarbonize the grid have driven significant additions of solar and wind capacity, presenting both opportunities and challenges for system flexibility and reliability. Given the growing need for dispatchable resources and Texas’s heavy reliance on natural gas, this study evaluates whether S+S systems can technically and economically perform the same role as NGCC plants in the Electric Reliability Council of Texas (ERCOT) market. We focus on mid-merit, load-following NGCC plants, organizing them into operational clusters based on shared characteristics and modeling S+S systems designed to replicate the specific “job” of each cluster. Our findings show that S+S systems can technically match NGCC load profiles for most of the year. With proper sizing, they also prove to be cost-competitive. Even when oversized to fully meet the technical role of NGCC plants, S+S systems demonstrate favorable cost performance—especially when the total energy produced, not just the load-matching portion, is factored in. That said, solar’s midday overproduction remains a key challenge. For the levelized cost of electricity (LCOE) of S+S to compete with that of NGCC, more than 70% of the otherwise “curtailed” energy must be utilized. It’s worth noting that our model uses a simplified dispatch framework and, as a result, likely understates S+S’s true economic potential, as it omits ancillary service revenue—an increasingly important source of earnings for batteries in ERCOT. Moreover, the ERCOT landscape is evolving rapidly. Shifts in natural gas prices, storage costs, solar tariffs, and load growth—especially from AI, crypto mining, and industrial activity—could all materially alter the economic outlook in the near term. While S+S may not yet be a one-to-one replacement for NGCC plants, it is both technically viable and economically compelling as a flexible, low-carbon option for mid-merit generation in a rapidly changing grid.