If you've noticed a significant increase in your utility bill this summer, you're not alone. Recent federal data reveals that electricity costs have surged by an average of 5.5% compared to last year, while natural gas prices have skyrocketed by 13.8%. An analysis from the Center for American Progress indicates that nearly 60 utility companies are planning to raise their electricity rates this year by over $38 billion, impacting more than 57 million Americans.
In response to these rising prices, former President Donald Trump has publicly criticized the shift towards renewable energy. On his platform, Truth Social, he denounced renewables as "THE SCAM OF THE CENTURY" and pledged to halt approvals for wind and solar projects. However, the root cause of the higher rates appears to be an increased demand for energy, largely driven by the rapid expansion of technologies such as artificial intelligence, oil and gas drilling, space heating, and electrified transportation—each requiring substantial power resources.
According to Rob Gramlich, president of Grid Strategies, a Washington D.C.-based energy consultancy, the energy demand has risen sharply after a two-decade period of stagnation, which saw a dip during the pandemic. The resurgence of economic activity post-pandemic has intensified this demand. Moreover, Russia's invasion of Ukraine has disrupted international energy supply chains, exacerbating the situation and leading to further increases in costs across the U.S.
Gramlich estimates that the nation will need to boost its energy capacity by 15%—approximately 120 gigawatts—by the end of the decade to keep pace with the growing demand. The U.S. Energy Information Administration anticipates that residential electricity rates could climb as much as 18% in the coming years, significantly outpacing the current inflation rate of about 2.7%.
One of the primary challenges in meeting this demand lies in the inadequacy of the U.S. transmission infrastructure. In a recent testimony before Congress, Gramlich stated that while there is no shortage of fuel to energize the grid, a severe shortage of transmission capacity is holding back progress. As of the end of 2023, over 2,600 gigawatts of energy were awaiting connection, which is more than double the current installed capacity of the U.S. power grid. Notably, 95% of this energy is derived from renewable sources such as solar, wind, and battery storage.
To align with the growing electricity needs, the U.S. must expand its transmission systems by 60% by 2030, with projections suggesting that this may need to triple by 2050, according to a 2022 report from the Department of Energy. "If we can get a lot of transmission built, then I think we can meet the AI-driven data center demands," stated Gramlich.
In addition to transmission issues, tariffs and equipment shortages are also driving up the costs of energy projects. Currently, there is a significant scarcity of gas turbines, which is hindering the expansion of natural gas power plants. The price of turbines has nearly tripled, with wait times stretching to three to seven years, as analyzed by S&P Global.
Over the past decade, the energy mix in the U.S. has progressively favored natural gas and renewables such as wind, solar, and hydropower, which have become increasingly cost-effective. However, new nuclear plants are not expected to come online until after 2030, and coal is becoming less economically viable due to rising maintenance and update costs aimed at addressing pollution concerns.
Former President Trump's energy policies have shifted focus away from renewable energy initiatives, favoring fossil fuel development instead. His administration's recent legislation, the One Big Beautiful Bill Act (OBBBA), is projected to raise energy costs, negatively impact job markets, and hinder efforts to meet rising energy demand. According to Energy Innovation, a nonpartisan energy and climate policy think tank, the OBBBA is expected to increase generation costs, resulting in a loss of approximately 340 gigawatts of power generation capacity by 2035—enough to power around 255 million homes.
Since taking office again, Trump has been dismantling Biden-era clean energy policies, leading to the cancellation of over $22 billion in renewable energy projects. Bob Keefe, executive director of E2, an environmental policy firm, expressed concern, stating that this slowdown in clean energy deployment is directly fueling cost increases. Indeed, data from the U.S. Energy Information Administration shows that states with more renewable energy are experiencing price declines, while those with less are facing rising costs.
To meet the growing energy demand, the U.S. Department of Energy has instructed utility companies to keep coal power plants operational beyond their planned retirement dates. This decision could cost ratepayers an estimated $3.1 billion annually by 2028. Despite the economic strain these coal plants impose, the current administration supports extending their operational life.
As of the end of 2023, coal's contribution to the energy mix was approximately 15.2%, a dramatic decrease from 45% in 1990. If fossil fuel plants postpone their retirement, the financial burden on ratepayers could escalate to over $6 billion. Nonetheless, Energy Secretary Chris Wright remains committed to prolonging fossil fuel generation in response to rising energy demands.
