Life costs more these days — a lot more. One particular pain point is the rising price of electricity, which has hit Americans hard in recent years. This household essential rose 5% in the last year alone and jumped 30% since 2021,* causing families to cut back in other areas just to pay electric bills.
As most of us have witnessed, annual utility bill increases are the norm, not the exception. However, as demand increases, infrastructure ages and extreme weather events continue at a rapid pace, we can expect the average electric bill to rise faster in the years ahead.
While we can’t control external pressures, we can control what happens at home. Finding ways to create and store our energy can help us reduce our dependence on utility electricity and put the power back in our own hands.
Before we address solutions, let’s look at the top factors driving up utility bills.
Why Are Electricity Bills Increasing?
Residential electricity is a commodity and therefore subject to the forces of supply and demand. Supply hurdles involve the costs of building, maintaining and operating power plants and grid infrastructure — costs that are passed down to utility customers. At the same time, demand is threatening to outpace supply, which creates energy shortages and further drives up prices.
Electricity Supply
Here are a few key factors that influence the supply side:
Volatile fuel prices & geopolitical factors
The price of natural gas fluctuates often and has a dramatic impact on the price of wholesale electricity. Prices were already escalating when Russia invaded Ukraine in early 2022. When the U.S. began exporting record amounts of liquefied natural gas to Europe, this led to the highest price surge in over a decade. Since then, wholesale prices have begun to fall, but these geopolitical factors have long-lasting implications.
Infrastructure investments
Hurricanes, wildfires, blizzards and even thunderstorms can damage utility equipment and interrupt service. Hardening the grid involves protecting and strengthening infrastructure to prepare for severe weather — no small feat. From burying power lines and installing steel poles to managing vegetation and improving monitoring, these upgrades require billions of dollars, which are passed onto ratepayers. According to experts, investments in transmission and distribution often account for more than half of the average family’s utility bill.*
Transitioning from fossil fuels
Modernizing the grid to handle the additional capacity of renewable generation is another massive undertaking. Aside from infrastructure upgrades, this involves making the grid ‘smarter’ and more resilient through cutting-edge technologies and controls to improve communication and grid security. Smart, digitalized and expanded grids are needed to prepare our nation for an electrified future and build a net-zero economy. But upgrading an outdated grid, while necessary and inevitable, also comes at a cost.
New energy-intensive sources, driven by trends
While artificial intelligence (AI) offers numerous exciting benefits, the power demands of these data centers will require investments in new generating capacity. For instance, the rise in AI queries and generation requires about 10x more power than traditional internet searches.* Bitcoin, the world’s largest cryptocurrency, requires enormous computing power each year (as much as a small country). Other pressures like electrifying the building and transportation sectors, plus a surge in industrial onshoring driven by the Inflation Reduction Act, may mean decades of increased power demand.
Electricity Demand
On the demand side, Americans are using more electricity for climate control, electronic devices, home appliances and EV charging.
Electricity prices vary considerably by region and utility territory due to a complexity of factors, such as pricing regulations, local fuel costs and the availability of power plants and energy sources. Many for-profit utilities also include a financial return for owners and shareholders in their average price of electricity.
Demand changes by season and costs fluctuate. Utility rates are usually the highest in the summer when more generation sources like peaker plants are added to the mix to meet energy needs. For instance, Americans have seen major spikes in summer cooling bills, which are on track to set a 10-year record, averaging $719 from June to September.* This 8% year-over-year increase may preview what’s to come, as temperatures become hotter and linger into fall.
How to Lower Your Electric Bill
As electricity rates trend upward, the best way to protect yourself is to reduce the number of kilowatt-hours you draw from the grid. Energy efficiency improvements are a good start, but to make a significant impact, residential solar is the way. By capturing the sunshine and using it to power your home, you may be able to reduce your utility bill when the sun is out.
When you invest in home solar, you’ll typically receive two bills: one from your solar service provider like Sunnova to pay for your system, and one from your utility to cover service charges and taxes. You’ll also pay for any electricity you draw from the grid, but this should be significantly lower, depending on your solar offset (how much of your monthly usage you want solar to cover). Your Sunnova bill will be an amount you agree to before your system is installed or based on your power production, depending on your financing option. This way, you’ll know exactly what you’ll be paying for up to 25 years and can break free from unpredictable utility rates.
Add a Battery to Maximize Utility Bill Savings
Solar panels only produce power during daylight hours, so if you’re looking for relief during the evenings when utility rates are the highest, you’ll need to add storage.
A solar battery is especially beneficial if your utility enforces time-based rates, charging different amounts electricity based on the season, time of day and day of the week. For instance, some utilities with time-of-use (TOU) structures charge peak rates in the evenings from 4 to 9 pm when demand soars. With a solar battery, you can use your own stored energy when rates are the highest without changing your lifestyle to avoid these timeframes.
If you choose a solar battery with backup capabilities, you can enjoy the resiliency benefit of keeping your home powered during an outage.* And, if you live in an area with attractive net metering policies, you can save even more by exporting your stored solar energy to the grid and earning credits on your electric bill.
Don’t Wait for Another Price Hike
As U.S. electricity prices outpace inflation, it makes the most financial sense to act sooner rather than later. Given the current supply and demand hurdles, experts agree there’s little chance for near-term consumer relief. By discussing your options with Sunnova, you have nothing to lose but sky-high utility bills.
Ready to learn how much you could save?
