Price of Electric Power

The price of electric power in the United States follows the general movements of the price of its inputs, chiefly coal, natural gas and nuclear isotopes. Coal generators produce about 20.0% of all electricity in the United States, while gas and nuclear power account for almost 60.0%. In recent years, the makeup of energy generation shifted from coal to natural gas. Natural gas is considered cleaner and with the discovery of new gas shale through the emergence of horizontal drilling technology, natural gas has experienced heightened use as an input to electricity generation.

The prerecession domestic construction boom and rapid industrialization of China and India caused continual increases in the demand for electric power. A ramp-up in construction in the US and Asia caused dramatic jumps in demand for electricity to power newly built buildings. The jumps in demand put a strain on the producers of the raw materials used to generate electric power, namely natural gas, coal and uranium. The prices of these inputs increased dramatically when producers could not keep up with the rising demand, forcing electric power generation companies to pass that cost on to consumers. As a result, the end price of electric power increased steadily, leading up to the 2008 financial crisis. However, the price increases were substantially less than the input price increases because various government levels strongly influence the price of electric power.

The financial crisis ended the construction boom, which substantially slowed the rise of electricity demand and therefore, electricity prices. However, prices still increased 0.8% over 2009 to 9.82 cents per kilowatt-hour and experienced virtually zero growth over 2010 because electricity is one of the last goods to be given up by consumers and businesses in the face of economic hardship and one of the first purchased following recoveries. Prices fell over 2012 as commodity prices began to slide. Economic growth fueled a rise in demand over 2013 and 2014. However, growth reversed in 2015 drastically in response to falling prices of key inputs like natural gas and coal. Between 2017 to 2019, continued economic growth caused electricity demand to rise, resulting in a continuous increase in electricity price in the period. The price of electricity also depends on various energy sources used to generate electricity. As a result of hydraulic fracturing boom, the price of natural gas is expected to decrease, driving the price of electricity to decline.

As many businesses temporarily closed amid the COVID-19 (coronavirus) pandemic and employers have created work-from-home arrangements for their staff, commercial and industrial electricity prices are expected to decline due to suppressed demand in these sectors. Meanwhile, residential electricity demand surged as people spent more time at home. Consequently, the price of electricity experienced fluctuations in price due to the shift in demand in 2020, up ticking meagerly at 0.5% With the economy reopening in 2021 with consumers starting to travel again and businesses starting to operate at a fuller capacity, electricity usage spiked again, growing electricity prices at 4.8% Growth of electricity prices continued into 2022, this time at a more accelerated rate with the onset of the Russian invasion of Ukraine which resulted in European countries raising their demands for gas and oil on the global market.

Other issues have also caused power grids to become more stressed in the United States with rising bouts of climate events such as heat waves and cold snaps that have presented challenges for energy providers to effectively maintain these grids without having them damaged by these weather patterns. While this is an issue that investments in fortifying these systems can fix, the large costs associated with doing so, including consistent maintenance and adjustments, have kept providers pressured. Similarly, supply chain issues and inflationary pressures have increased costs for essential items like aluminum, one of the many metals used for power grids, which has increased in price in the year. In turn, because of these varying trends, electricity prices grew 11.6% in 2022 alone. While inflationary pressures remained high, electric prices continued to increase by 2.4% in 2023. Meanwhile in 2024 and 2025, electricity prices increased at similar levels, leading to the prices rising at a CAGR of 4.7% over the past five years.