Old infrastructure, increasing demand, and guaranteed profits are running up the tabs on American homeowners. Solar panels on your home or business can be the answer!
Homeowners are increasingly feeling the sting of rising electric bills, a trend that shows no signs of abating. To understand why electricity costs are climbing and why they are likely to continue rising, it's crucial to examine the various factors at play, with a particular focus on the aging electric grid. American property owners may not have much influence over the ever increasing price of their kilowatt hours, but they do have ways to fight back!
The Aging Electric Grid: A Major Contributor:
The electric grid, an essential component of our energy infrastructure, is showing signs of significant wear and tear. This aging infrastructure is one of the primary reasons for rising electricity costs. America hasn’t really seen a significant grid investment in the last 60 years, until the Inflation Reduction Act (IRA). This much needed infrastructure bill will not make the problems facing homeowners go away overnight, but it is a good step in the right direction. Because investments take time to see returns, and because the country’s infrastructure was long overdue for an upgrade, homeowners are in for a tough road ahead.
The American Society of Civil Engineers (ASCE) rated the U.S. electric grid a dismal “D+” in their 2021 Infrastructure Report Card. The report highlighted that much of the grid is outdated and requires extensive modernization. With expensive and swift improvements, homeowners reliant on the grid will experience outages. And even if significant outages aren’t experienced, normal electric ratepayers will be paying for it!
According to the U.S. Department of Energy (DOE), the cost of modernizing the electric grid could reach between $1.5 trillion and $2 trillion over the next two decades. These costs are typically passed down to consumers through higher utility rates. The return on investment guaranteed to utilities is a huge factor in these increased rates.
The U.S. Energy Information Administration (EIA) estimates that power outages, often caused by aging infrastructure, cost the U.S. economy between $18 billion and $33 billion annually. Utilities must invest more in grid resilience to reduce these outages, which contributes to higher bills for consumers.
Increasing Demand and Grid Strain:
Rising electricity demand is another significant factor driving up costs. As technology advances and more energy-intensive devices become common, the strain on the electric grid increases. So homeowners are facing both an aging grid that is desperate for an overhaul and an even more dire need to keep up with increasing demand and electrification!
The EIA reports that residential electricity consumption in the U.S. increased by about 4% from 2021 to 2022. As homes adopt more smart devices and energy-intensive appliances, this trend is likely to continue, further straining the grid. This also relates to the electrification of more and more aspects of life. Getting away from fossil fuels will, in the long run, be a much more affordable and sustainable answer, but there will be an upward pressure on kWh prices as electricity demand goes up in the short run for property owners.
Data centers and rapid, large scale adoption of new technology is only going to exacerbate this problem, some are even pointing to this being the biggest contributor. However the problem is dissected and looked, and from whatever angle analysts try to take on it, the common consensus is clear: electric rates have and will continue to increase.
While transitioning to renewable energy sources like wind and solar is crucial for environmental sustainability, it comes with substantial costs. The investments required to develop and integrate these technologies into the grid contribute to higher electricity prices.
The International Renewable Energy Agency (IRENA) reported that global investments in renewable energy reached approximately $1.7 trillion in 2022. These upfront costs are often reflected in higher utility rates for consumers. The National Renewable Energy Laboratory (NREL) estimates that integrating 50% renewable energy into the grid could require up to $300 billion in additional investments by 2030. This includes costs related to energy storage, grid upgrades, and backup systems. Solar panel and wind turbine installations also have a heavy upfront cost, although they are now significantly cheaper than fossil fuel plants to keep up with rising demand. These investments on a massive scale will take time to pay off, and in the meantime homeowners will pay the price. Unless homeowners take control of their energy future by installing solar panels on their own homes, they will be paying more than they are now for the same amount of electricity they are using.
Policy and Regulatory Issues: Making the Problem Worse:
Regulatory and policy changes aimed at reducing carbon emissions and promoting cleaner energy sources also impact electricity prices. Utilities often face increased costs as they adapt to new regulations, which are passed on to consumers. Not only are homeowners forced to pay for the real costs associated with these transitions, they are also forced to pay, through regulation, higher than average returns for those companies who own the assets. This can be changed! Homeowners can choose to invest in their homes by installing solar panels, instead of paying their utility company to install the same solar panels and have that same utility sell them back the power at a premium.
Electric bills are going to go up. So what can be done about it? Reach out to a trusted provider today to get on the path towards energy freedom. Also, stay tuned for the next Gold Path Solar blog that will dive deeper into the future outlook of our electricity prices and how solar for your home can help homeowners secure their access to power and save thousands while doing so.
