ELI5: what exactly are RTOs/ISOs and how are they driving up energy costs?

r/

I have some very cursory understanding that generation of energy is different than distribution of energy and that RTOs do the latter.

I’ve heard that RTOs are driving prices of electricity and gas up, disincentivizing “baseload” energy (I don’t exactly know what that means) like coal and nuclear, and basically subsidizing wind and solar.

I do not know enough about it to know if I’m hearing personal editorials on the topic or if this is legit.

Someone please help me understand 🙂

Comments

  1. Left-Preference4457 Avatar

    RTOs/ISOs manage electricity markets and grid flow, and while aiming for efficiency and clean energy, their rules can raise costs and discourage always-on power like coal and nuclear.

  2. PyrexVision00 Avatar

    What Are RTOs and ISOs?

    RTO (Regional Transmission Organization) and ISO (Independent System Operator) are like air traffic control for electricity. They don’t generate power, they don’t deliver it to your house. They manage the grid and the wholesale electricity markets in big regions of the U.S.

    They make sure:
    • Power flows smoothly and reliably from generators to utilities.
    • The electricity market is “fair,” competitive, and efficient.
    • Supply and demand are balanced—every 5 minutes.

    Think logistics coordinators and market referees.

    Do They Drive Up Energy Prices?

    Not directly. RTOs don’t set prices—they run markets where power producers (like coal, gas, wind, solar) bid to sell electricity. The cheapest bidder wins.

    But here’s where the controversy starts:

    Why People Say They Drive Up Costs:

    1. Intermittent Renewables Lower Market Prices Short-Term
      Wind and solar have no fuel costs, so they often bid $0. That drives market prices down, which sounds good, right?

    2. Baseload Plants Struggle
      Big, stable plants (like nuclear and coal) can’t compete on price anymore, but they’re still critical for grid reliability. When these shut down due to market pressure, we end up needing more natural gas, especially during extreme weather.

    3. Price Spikes in Stress Events
      During grid emergencies (heatwaves, polar vortexes), supply can’t keep up, and prices skyrocket—this is when people say RTOs “cause” high prices. Really, they just expose flaws in supply planning.

    4. Markets Don’t Reward Reliability Well
      The system often pays for cheapness, not resilience. So the grid becomes fragile, and fixing that fragility—after the fact—costs more money.

    Are They Subsidizing Wind and Solar?

    No. States and the federal government give those subsidies, not RTOs. But RTOs do integrate those resources first because they’re cheaper—per the market rules. It feels like favoritism, but it’s more about the math.

    It’s not a conspiracy. It’s a market design problem in a system that wasn’t built for this much renewable energy yet.

  3. tomrlutong Avatar

    They’re non-profit organizations that run power markets, manage grid operations day to day, and do long term transmission planning. In recent years gas has been cheaper than coal, so many coal plants retired. 

    RTOs do not plan power plants. But, especially in the Mid-Atlantic, states were relying on RTO-run markets to take the place of planning, invisible hand and all that that. That didn’t work, and between coal retirements, increasing demand, and newly exposed problems with gas plants, we’re getting short* on electricity, so prices have shot up.

    In the background, RTOs are also responsible for the process of connecting new power plants to the grid, and many have fallen years behind. That hasn’t helped.

    * “Short on electricity” might not mean what it sounds like. Normally, there’s plenty of electricity, even on the highest demand times of year. But, if there’s a winter storm and lots of gas plants fail, them there might be shortages and blackouts.

    Edit: I’m kind of curious, where are you hearing about this? It’s usually an obscure little world. I will say it sounds like your getting a version of reality filtered through right-wing conspiracy theory glasses.