A promise to cut energy prices was at the heart of President Trump’s campaign platform. But so far, his administration’s policies have failed to deliver on that pledge. In fact, Rhodium forecasts that energy costs will rise even more as the administration promotes fossil fuels at the expense of renewable energy and data centers.
The price of energy is determined by the sum of all costs collected by utilities through electricity billings – including infrastructure and generation costs, fuel costs, and profits – divided by the amount of electricity consumed. Utility tariffs establish formulas for calculating prices, but they vary widely across the US. Our recently-completed research project collected and analyzed tariffs from all the major electric utilities in the US to build computation tools that allow for a more accurate, detailed estimate of electricity prices.
Prices have been surging since 2021, fueled by the return of global demand after the pandemic and tight supply due to years of subdued investment in energy infrastructure. The surge has been exacerbated by Russia’s invasion of Ukraine and concerns about future supply.
However, it is important to understand that the increase in energy prices is not just temporary. Prices will remain high, and perhaps more volatile, as long as we continue to invest in a power system that relies on fossil fuels. This is because a grid that focuses on expanding fossil fuel build-out increases retail electricity prices and uncertainty, compared to a deeply decarbonized grid that maximizes low-cost, variable renewables and energy storage.
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