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While electricity generation costs have come down thanks to technologies such as solar and wind, transmission and distribution costs have driven up bills, according to a report by the Lawrence Berkeley National Laboratory. The price of almost everything has risen over the past two years as the world grapples with the reverberations of a global supply chain disrupted by the COVID-19 pandemic. Borrowing costs and inflation have pushed up prices, but in the United States electricity prices are rising significantly at a faster rate than inflation. A report from Lawrence Berkeley National Laboratory (LBNL) shows that retail electricity prices rose at a moderate average rate of 2.5% per year between 2014 and 2023. However, in recent years, price increases have skyrocketed. Average U.S. electricity rates rose 4.8% annually from 2019 to 2023. The Energy Information Administration reported that state utility regulators approved $9.7 billion in net rate increases in 2023, more than double the $4.4 billion authorized in 2022. According to the U.S. Energy Information Administration (EIA), rate increases will total about $9 billion in 2024. Over the past three winters, year-over-year nominal residential electricity price increases have averaged 7%, according to the EIA. While inflation played a role in these rate increases, LNBLs analysis suggested that rising utility costs related to electricity distribution and transmission are driving the rate increases. “Accounting for inflation, average U.S. retail electricity prices were mostly flat between 2019 and 2023, although they have been rising faster than inflation for residential customers. Since 2019, revenues collected have increased by more than 20%, while retail sales have remained fairly flat, indicating that recent increases in retail electricity prices have been driven primarily by rising revenues (costs),” the report notes. While the total volume of solar electricity has remained flat or declined in recent years, the total revenue collected has increased faster than the pace of inflation, as seen below. As seen in the chart below, generation costs are coming down. This can be attributed to technologies such as solar and wind, which are continually reaching new lows for the levelized cost of electricity. LBNL reported that 63% of cost increases from 2019 to 2023 can be attributed to transmission and distribution costs. The ever-rising costs due to grid aging highlight the potential for a different way of designing power systems. Distributed resources, such as rooftop solar panels, reduce the amount of transmission and distribution that needs to be built. Residential solar loans and leases, sometimes called power purchase agreements, are typically tied to either a fixed monthly rate for 25 years or one that increases by 2.9% each year over the life of the contract. With rates increasing by nearly 5% each year, and demand from electric vehicles, data centers and grid overhaul expected to push prices even higher, adopting solar at home can offer an opportunity to gain more clarity about your future costs and achieve significant long-term savings. |
