President Donald Trump’s campaign promise to cut energy costs in half is facing a daunting reality.
Electricity prices are tracking toward heights unseen since the 1990s when factoring in inflation, according to a new report from the conservative think tank American Enterprise Institute (AEI).
Skyrocketing demand from power-hungry technology like artificial intelligence is driving the trend, and Americans are feeling the pinch.
David Michael Tinsley, senior economist at Bank of America Institute, said in a research note Friday that “utility bill payments continue to grow at elevated rates.”
“If the labor market were to cool — and job openings are well down on their previous levels — then consumers may increasingly feel the need to ease back on discretionary spending to keep the lights (and the heat) on,” Tinsley said.
Trump so far has cracked down on renewables and blown up U.S. climate policy, arguing that more fossil fuels like natural gas will drive down costs for Americans.
But experts say it’s not that simple. Gas supporters are calling for more federal support to modernize the sector, while critics say Trump should embrace low-cost wind and solar and dole out rebates for home upgrades if he wants to bring down energy costs.
The U.S. electricity grid is highly balkanized, and a wide variety of factors determine residential prices, including power generation and distribution and state regulations on utilities.
Those factors will be front and center in Washington this week.
The National Association of Regulatory Utility Commissioners is in town for its annual meeting and focusing on modernizing transmission and reducing costs. Members of the American Public Power Association, which represents nonprofit utilities, will also flood Capitol Hill to push for energy permitting reform.
Experts blame transmission for the lion’s share of cost spikes.
“A lot of people are seeing increasing prices,” said Lynne Kiesling, director of the Institute for Regulatory Law and Economics at Northwestern University, a member of the Department of Energy’s Electricity Advisory Committee and lead author on the AEI report. “It’s those wires and systems charges that are going up.”
Federal funding for transmission and other projects is unclear after the president issued an Inauguration Day executive order to halt money for the “Green New Deal,” a reference to efforts to decarbonize the U.S. and push other social policies.
Despite court decisions to force disbursement, project developers are reporting challenges in obtaining some grant money authorized under Biden. Advocates say DOE funding for transmission projects, like the billions it’s already authorized through its Grid Resilience and Innovation Partnerships Program, are critical to reduce costs. Those projects are often designed to transport new wind and solar energy to population centers.
DOE did not respond for comment on the status of the grants.
Renewables and rebates
For now, Americans are girding. Rates will jump dramatically this year for many customers in PJM Interconnection, a 13-state electricity grid operator in the mid Atlantic and Midwest.
Clean energy supporters say the Trump administration’s chances at cutting costs are doomed if it pushes fossil-fuel-first priorities.
“I don’t see how any of the Trump administration policies could realistically reduce electricity prices for consumers,” said Michelle Solomon, manager of the electricity program at the research firm Energy Innovation. “It seems like the Trump administration is trying to put its thumb on the scales for certain resources over others versus letting the market dictate which resources are the cheapest.”
On top of gas and even coal, the administration is bullish on nuclear energy. Experts also say geothermal energy is a fuel source that could get traction in the coming years. Energy Secretary Chris Wright had financial ties to both nuclear and geothermal before selling stocks and resigning positions to take the Cabinet position.
Solomon said over 90 percent of new resources added to the grid last year were wind, solar and batteries, the latter of which is needed to use wind and solar electrons when they’re not being produced.
“What’s waiting in line to connect to the grid is largely wind, solar and batteries,” Solomon said. “That means those wind, solar and battery projects are kind of in various stages of development, whereas with a gas project, you’re going to have to be starting from scratch.”
Clean energy advocates are also pushing the Trump administration to release nearly $9 billion in DOE rebates to homeowners who update energy systems at home, which could go a long way to reducing utility bills.
An Arizona official recently told POLITICO’s E&E News that its rebate money had been paused.
“The rebate programs were not a part of the Green New Deal,” said Kara Rinaldi, president of the AnnDyl Policy Group, which lobbied in favor of the rebates. “There are contractors, homeowners and states who have plans to use these rebates to make housing more affordable and to cut their energy bills.”
Meanwhile, some state and local electrification initiatives have hit fierce resistance, most notably those that seek to phase out gas infrastructure. In a summary to a new report this week, the United Kingdom-based think tank InfluenceMap said the American Gas Association (AGA) “has been particularly successful in spearheading an anti-electrification campaign in the U.S.”
The pitch for fossil fuels
Nationally, the Bank of America research note points to a nearly 2 percent increase in electricity prices over the past 12 months, along with a 4.9 percent increase in natural gas prices.
Still, the answer for Republicans to the price challenge lies largely in making it easier to produce and transport fossil fuels, namely natural gas.
Trump is vowing to open up more lands for oil and gas drilling. And Republicans in Congress are aiming this week to overturn a Biden administration regulation to tax methane emissions, a move that would cushion the bottom lines for gas producers.
But state and local opposition to pipelines is a major problem for gas producers. The Trump administration is already trying to use the Army Corps of Engineersto speed up permitting for gas pipelines and other energy projects.
AGA is also promoting a wide range of gas efficiency measures, including loan curtailment that could decrease costs of distribution.
“From providing affordable energy to consumers to driving down emissions, the benefits this fuel has for our nation and our world are indisputable,” AGA President Karen Harbert said in a statement to E&E News in response to the InfluenceMap report “This industry continues to innovate and advance technologies to help ensure Americans have access to the safe, efficient and reliable energy they need and expect.”
Roughly 50 percent of Americans use gas hookups for home heating and cooking — and the fuel provides electricity to even more Americans through the grid.
For now, the Trump administration is facing a formidable challenge.
“We’re in a flux moment,” said Kiesling. “It’s unsettling.”
Correction: A previous version of this story mischaracterized the American Public Power Association lobbying priorities.
