Electricity prices are surging across the US, with rates increasing more than twice as fast as inflation over the past year. The reason behind this trend is complex, but it’s not related to renewable energy sources as claimed by President Trump.
The main driver of higher costs is actually the aging power grid itself. Utilities have spent billions on upgrading and maintaining the distribution system, including poles and wires, which make up nearly half of all utility spending. This surge in spending is attributed to several factors, including a shortage of transformers, increased demand for electricity due to data centers, and the rising cost of natural disasters.
Data centers are emerging as a new contributor to higher power costs, with their growing demand on the grid driving up prices in capacity markets. The Trump administration’s policies, such as terminating wind and solar tax credits and imposing tariffs on electrical equipment, will make it more expensive to add new power capacity to the strained grid, ultimately affecting power bills.
Experts warn that electricity rates will continue to rise, with transmission costs hovering around 20% of total utility investment. While higher transmission spending may eventually bring down electricity rates by allowing utilities to access cheaper power in neighboring areas or connect to distant solar and wind projects, this process takes time.
The increasing cost of natural disasters is another significant factor, as utilities face higher costs when rebuilding the grid after severe weather events. Wildfires seem to be growing faster due to climate change, and relatively few hurricanes made landfall in the US during the 2010s compared to the 2020s.
As a result, North Carolina’s electricity rates rose significantly due to natural gas price hikes. The situation is expected to worsen unless policymakers address the root causes of these rising costs, including the aging power grid and increasing demand for electricity from data centers.
Source: https://heatmap.news/energy/why-is-electricity-so-expensive