The Myth of Cheap Power: Why Rising Electricity Prices Are Inevitable

This article is part of my series on "The Next Economy: Business, Energy & Sustainability in Transition"

For most of the past half-century, Americans have lived inside a comforting illusion: that electricity is cheap and should stay that way. It should be reliable and invisible, something that hums in the background while we get on with the real business of life.

That illusion is cracking. Across the country, utilities are quietly filing double-digit rate increases.[1] California’s Pacific Gas & Electric now charges an average of 32 cents per kilowatt-hour, nearly twice what it cost a decade ago.[2] North Carolina, Georgia, and Arizona have all approved multi-year hikes. The national average sits near 16 cents, and the trendline points sharply upward.[3]

For the first time in decades, electricity prices are set to rise faster than inflation. It is easy to scapegoat clean energy, but the truth is more complicated. The cost of decarbonizing our grid is real, but so is the cost of doing nothing, and that bill is coming due whether we acknowledge it or not.

Image source: TRC Companies

The Real Price of Power

Electricity prices are rising because America is finally rebuilding the energy system it has been neglecting for half a century. Utilities are replacing 1970s-era transmission lines, hardening distribution networks against wildfires and storms, and connecting massive new solar and wind farms to distant population centers.

The Edison Electric Institute estimates that utilities will invest $150 billion per year through the 2030s, three times their historical average.[4] Building new high-voltage lines will add two or three cents per kilowatt-hour to the average bill and undergrounding wires and upgrading substations add another couple of cents.

Battery storage - vital for smoothing the solar “duck curve” and keeping lights on after sunset - costs about $120–150 per megawatt-hour,[5] nearly quadruple the cost of solar generation itself. Reliability, it turns out, isn’t free.

Even though the Inflation Reduction Act still offers one of the largest federal buffers against rising energy-system costs,[6] that buffer is now subject to rollback risk.[7] As a result, most analysts continue to expect upward pressure on U.S. electricity prices, many projecting 15-40% growth nationally by 2030.[8]

For politicians and ratepayers alike, this feels like bad news. But before we panic about the cost of transition, we should be honest about what we’re paying for.

The Cost of Decades of Delay

When people complain about rising electricity bills, they often imagine that the alternative of sticking with what we have costs nothing. That’s the biggest economic lie of our time.

The status quo is already expensive. We just pay those bills in different accounts: through taxes, insurance premiums, hospital visits, and disaster relief.

· In the past five years alone, the U.S. has suffered $617 billion in climate-related disasters, including wildfires, floods, hurricanes, and heat waves.[9] Those costs show up in rising insurance rates and federal deficits, not in your utility statement.

· Fossil fuel pollution kills roughly 100,000 Americans a year, according to Harvard research, imposing $800 billion in annual health costs.[10] That’s equivalent to an extra five cents on every kilowatt-hour of fossil-fired power, just hidden in the health-care budget.

· Gas-price volatility during the 2022 energy crisis added $70 billion to U.S. electricity bills in a single year. The supposed “cheapness” of gas power depends on global commodities and geopolitics we don’t control.

· Heat waves and blackouts already cost the U.S. economy $100–200 billion annually in lost productivity. Those losses are rising exponentially.

And behind all of this sits an enormous unpaid tab: the social cost of carbon, a government-calculated estimate of the damages caused by each ton of CO₂ emitted into the atmosphere. Economists across administrations once treated it as a basic accounting tool, helping policymakers weigh the hidden costs of pollution against the price of prevention.

Today, that line item is being scrubbed from official documents. Federal agencies have been instructed to delete references to the social cost of carbon from regulations and policy analyses.[11] The numbers may vanish from spreadsheets, but the costs they represent - flooded cities, failed crops, rising seas - do not. Pretending those damages don’t exist doesn’t make them go away, but only ensures we’ll pay them later, with interest.

At roughly $190 per ton of CO₂, the social cost of carbon adds six to eight cents to every kilowatt-hour of coal or gas electricity.[12] If that cost were visible on monthly bills, fossil power would no longer look cheap.

In other words, the clean-energy transition doesn’t make electricity expensive. It finally makes its costs visible.

Why We’re Paying More Now

Several powerful forces are converging to push electricity demand up and costs higher:

1. Electrification of everything. Electric vehicles, heat pumps, and industrial electrification are adding load faster than utilities can build generation. The grid, once stagnant, could see 30–40 percent growth in demand by 2035.[13]

2. The AI super-cycle. Data centers for artificial intelligence now consume as much power as small cities. Google, Microsoft, and Amazon are doubling their electricity use every few years as AI workloads explode.[14] In Virginia, utilities blame data-center growth for 15 percent rate hikes.

3. Aging infrastructure. Half the nation’s transmission lines are over 50 years old.[15] They were never designed for a grid that runs on distributed solar, offshore wind, and millions of EV chargers.

4. Climate resilience. Wildfires, hurricanes, and heat waves are forcing utilities to invest billions in undergrounding, smart meters, and stronger substations. These upgrades are essential but capital-intensive.

Each of these investments raises short-term rates but lowers long-term risk. Like fixing the roof before the storm, the cost hurts now and saves later.

Who Pays - and Who Benefits

The politics of rising electricity prices will hinge on fairness. Most state regulators still push the cost of capital upgrades onto ratepayers. That makes sense for regulated monopolies, but it risks a backlash if households see higher bills without visible benefits.

There are better options. Corporate buyers like Google and Microsoft are already signing multi-billion-dollar, long-term clean-power contracts that help finance new infrastructure.[16] Federal green bonds or public-private transmission projects can cut borrowing costs by one or two percentage points—saving tens of billions in rate recovery. Targeted rebates and community solar programs can protect low-income households from higher rates.

The goal shouldn’t be to stop prices from rising; it should be to make sure the value rises with them.

The Cheap Power Illusion

For much of the twentieth century, America’s energy advantage came from abundant fossil fuels. But cheap gas and coal were never truly cheap. They were subsidized by the climate, by public health, by future generations.

Today, as the planet warms and disasters multiply, that illusion is collapsing. The real choice is not between “expensive clean energy” and “cheap fossil energy.” It’s between paying now to build a resilient, zero-carbon system or paying far more later to survive the consequences of the one we already have.

Yes, electricity bills will rise in the coming decade. But those increases represent something profound: the first honest accounting of what power really costs. We are, finally, paying the price of “must haves”: reliability, safety, independence from volatile fuels, even survival.

The Only Unaffordable Option

It’s easy to scapegoat the energy transition for higher bills. It’s harder to admit that for fifty years, Americans underpaid for electricity by overdrawing on natural capital and deferring maintenance on the very system that keeps our civilization running.

Now the bill has arrived. We can pay it in the form of smarter grids, cleaner power, and more resilient communities - or we can pay it in lost lives, burned towns, and broken economies.

One way or another, we’re going to pay. The only unaffordable option is pretending that doing nothing is free.

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References

[1] Edison Electric Institute. (2025, July 23). Electric utilities will invest more than $1.1 trillion by 2030 to meet demand growth. Utility Dive.

[2] Edison Electric Institute. (2024). Industry capital expenditures: U.S. investor-owned electric utilities.

[3] U.S. Energy Information Administration. (2025, September 23). Electric Power Monthly: Table 5.3. Average price of electricity to ultimate customers: Total by end-use sector, 2015–July 2025 [Data table]. U.S. Department of Energy.

[4] Edison Electric Institute. (2024). 2024 Financial Review: U.S. electric companies projected to invest more than $1.1 trillion between 2025 and 2029.

[5] Lazard, Inc. (2025, June). Levelized cost of energy+ (LCOE+): Version 18.0 [Report].

[6] U.S. Environmental Protection Agency. (2024). Summary of Inflation Reduction Act provisions related to renewable energy.

[7] Holland & Knight LLP. (2025, June 30). Senate moves to scale back clean-energy tax credits under the IRA: Latest updates.

[8] ICF. (2025, May). Rising current: America’s growing electricity demand. ICF.

[9] National Oceanic and Atmospheric Administration, National Centers for Environmental Information. (2025, November 10). U.S. billion-dollar weather and climate disasters.

[10] Natural Resources Defense Council. (2021, May 20). Report: Health costs from climate change and fossil-fuel pollution top $820 billion per year.

[11] Ball, M. (2025, May 9). White House ends use of carbon cost. Argus Media.

[12] E&E News. (2025, May 9). White House bars agencies from using the social cost of carbon.

[13] International Energy Agency. (2025, April). Data centers and AI: Electricity demand projections to 2030.

[14] Deloitte LLP. (2024, August). Funding the growth in the U.S. power sector: Investments could total as much as US$1.4 trillion from 2025–2030.

[15] National Conference of State Legislatures. (2024). Modernizing the electric grid: State role and policy options. Black & Veatch.

[16] Reuters. (2025, July 15). Google inks $3 billion U.S. hydropower deal in largest clean-energy agreement of its kind. Reuters.