1 level above "tough" I assure you more than 2 races research it. On "tough" i see it sometimes....This has been my experience.
You have no idea how powerful early psionic weapons are untill your facing one (some tech trees allow VERY early psibeam!). Good lord.
Also my custom race opponent( Whom I use as my custom race when im not having fun with natural races) seems to beeline for xeno ethics first and comes out with some very potent weapons or armor and quickyl takes the lead.
In most games my custom AI is the last person standing, and I find myself loosing sometimes (more often than say, against korath for example)