After decades of stable electricity prices, electricity prices for U.S. residents have risen by a third in the past four years.
The fossil fuel lobby and some Republican politicians are using this opportunity to falsely blame clean energy.
“We're going to lower energy prices,” former President Donald Trump said at a rally in Wisconsin in August 2024. “You know, it's caused by their terrible energy – the wind.”
In fact, wind energy is the cheapest new energy source in the United States today.
It's true that wind and solar power are intermittent, depending on weather and time of day. Therefore, these power sources require the construction of more energy storage and transmission lines. But their fuel is free, unlike fossil fuels whose prices vary widely.
Substantial evidence, including real-world electricity prices and generation mixes, shows that wind and solar tend to lower electricity prices compared to fossil fuels. Bottom line: Electricity prices generally rise for the same reason as other factors—inflation.
Some states with large amounts of cheap renewable energy have lower electricity prices
Wind energy has been the cheapest source of new electricity in the United States for about a decade, according to Lazard Financial Services' annual levelized cost of energy report.
The analysis considers the cost of generating electricity over the entire life cycle of the power source, including factors such as capital, operations and maintenance, fuel costs, financing and utilization. In other words, it explains that wind and solar energy are intermittent. Still, they are two of the cheapest new energy sources available in the United States today, especially considering the Clean Energy Tax Credit from the Inflation Reduction Act (IRA) of 2022.
Because wind power has long been cheap, many states in the windy central region of the United States have installed large numbers of wind turbines. These states provide a real-world test of the impact of deploying renewable energy on electricity prices. As the chart below shows, many of the states with the highest shares of wind and solar power, such as Iowa, the Dakotas, Kansas, Oklahoma and New Mexico, have some of the lowest electricity prices in the country. Joshua Smith, a research associate at the University of Texas at Austin, estimated in a 2023 report that renewable energy lowered electricity prices in the state by about 13% from 2018 to 2022.
Why are electricity bills rising?
U.S. electricity prices have long remained stable, generally deviating by no more than plus or minus 10% from the national average of about 15 cents per kilowatt-hour. However, since 2022, electricity prices across the country have increased by nearly 20% compared to the long-term average, to nearly 18 cents per kilowatt hour.
Energy Innovation, a Yale Climate Connection partner and energy and climate policy think tank, recently released a report trying to figure out why electricity prices are rising. The title of the report does not leave readers in suspense: “Clean energy won’t drive electricity prices soar.”
Instead, the cost of just about everything has increased over the past few years due to inflation caused primarily by the COVID-19 pandemic. The Energy Innovation Report notes that U.S. electricity bills have risen at the same rate as inflation since 2010. But electricity bill Growth has been slower due to improvements in home energy efficiency: energy-efficient appliances and light bulbs, for example, mean households can keep the lights on (and the dishes washed) while using less electricity.
Some states have seen bigger power price increases than others. Energy Innovation concluded that the most expensive rate hikes occurred in states with high fossil fuel generation. The report found that many utilities continue to invest heavily in aging, expensive coal-fired power plants. The report states that “as natural gas prices have soared since 2020, the countries most reliant on natural gas for electricity generation have been those with the highest increases in retail prices,” in large part because “Russia's invasion of Ukraine has Europe scrambling to reduce its reliance on natural gas.” .
Maintaining and upgrading the grid also adds costs. Many transmission and distribution lines in the United States were built more than 50 years ago and need to be replaced and modernized. Electricity demand continues to grow due to factors such as expanding data centers, artificial intelligence, and the electrification of vehicles and buildings. But no matter where we get our electricity from, most infrastructure upgrades are necessary.
Wildfires, not renewable energy, driving California rate increases
California has some of the highest electricity prices in the continental United States, and about one-third of its electricity comes from renewable sources. (It’s worth noting that California home energy bills are close to the national average because the state invests heavily in energy efficiency, so while electricity bills are high, electricity usage is low.)
Electricity bills have risen rapidly in California over the past few years, largely due to wildfire risk. Pacific Gas & Electric is responsible for more than $16 billion in insured losses from the 2018 Camp Fire that devastated Paradise. Risk insurance pools, wildfires and wildfires provide funding. According to the California Public Utilities Commission, wildfire-related costs are the main reason for rising electricity prices in the state.
Research shows that climate change is a “threat multiplier” for wildfires, doubling the area burned by wildfires in California over the past 30 years. One of the most important ways to reduce these risks and avoid worsening wildfires and the resulting rise in electricity prices is to deploy climate solutions like solar and wind.
Ultimately, the Energy Innovation Report identifies wind and solar as the solution, not the cause, of rising electricity prices.
“Volatile fossil fuel prices, the cost of climate-driven wildfires, and a surge in spending on aging infrastructure are all contributing to higher rates, while falling clean energy costs are helping to offset these factors,” the report concluded.
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