Will Electric Rates Become the New Gas Price?

President Biden’s administration worries about gas prices reaching or exceeding $4 a gallon—a price where the electorate looks for an alternative to the incumbency in a Presidential election. Last time, gas prices were that high was before the 2022 mid-term elections when President Biden released billions of barrels of oil from the Strategic Petroleum Reserve, leaving it at its lowest level in 40 years. Since that alternative has largely been diminished with few barrels bought back to restock it, gas prices could again be a concern as they are escalating due to a number of factors including growth in global demand, geopolitical unrest and anti-oil policies by the Biden administration.

But electric rates may soon give the Biden administration another energy sector to worry about. Residential electricity prices have increased an average of 27 percent across the nation since President Biden has taken office due to his climate agenda, including increasing weather-driven wind and solar power on the grid and forced electrification of the transportation, heating and cooking industries through standards and regulations. So far, the percentage increase in electricity prices is about half the percentage increase in gasoline prices (52 percent) since Biden has taken office, but it is growing. EPA regulations are forcing existing coal and natural gas generators to retire and be replaced by heavily taxpayer-subsidized wind and solar units that require very expensive battery back-up. Biden also wants expensive offshore wind along the Atlantic, Pacific and Gulf coasts that will also escalate electric prices as offshore wind is over 3 times as expensive as onshore wind and more than double the cost of natural gas combined cycle technology.

Electricity prices may not have surfaced yet to be an election concern as they vary widely across the nation with blue states having the highest prices—states that are more in tune with Biden’s climate agenda. For instance, California has the third highest electricity prices in the nation at 29.11 cents per kilowatt hour—almost double the national average price. On a percentage basis, they have risen more than any other state due to the anti-fossil fuel policies in the state. In 2022, the California Public Utilities Commission unanimously approved a project to add more than 25 gigawatts of renewables and 15 gigawatts of batteries to the state’s electric grid by 2032 at an estimated cost of $49.3 billion. Also in 2022, the California Independent System Operator released a plan to upgrade the state’s transmission grid at a cost of some $30.5 billion. The combined cost of those two plans is about $80 billion and could be an underestimate with inflation under Biden continuing. The state’s biggest electricity provider, PG&E Corp., raised bills for residential customers 13 percent in January, and expects more increases may be coming this year.

Nationwide, residential electricity inflation is outpacing the wider consumer price index. Prices were up 3.6 percent in February from a year earlier, compared with declines for staples such as eggs and milk, according to the U.S. Bureau of Labor Statistics. More than three out of every four major metropolitan areas the Labor Department tracks in the continental United States saw power prices rise in the latest month of data—which voters may factor into their assessment of President Joe Biden’s performance when they head to the polls in November.

Behind the price increase are several massive expenditures that utilities are having to fund at the same time. Grids coast to coast were already undergoing a multibillion-dollar transition to replace fossil fuel plants with “green” technologies. Now grids also need to increase generation capacity to accommodate a surge in demand that the utilities themselves were not forecasting a year or two ago, fueled by artificial intelligence, data centers, federally subsidized manufacturing plants and Biden’s forced electrification program.

Electricity Demand Is Expected to Soar

Electric demand by 2028 is expected by some to be almost 5 percent more than 2023 consumption levels, nearly double the increase companies were expecting a year ago, surprising companies that saw 20 to 25 years of flat power demand. Funding that tremendous expansion on top of the transition to renewable energy, including burying power lines underground, fireproofing poles and replacing fossil fuel plants with solar panels and wind turbines, will ultimately be paid for by electricity ratepayers, who will be asked to foot the bill for new infrastructure.

Georgia Power recently increased 17-fold its winter power demand forecast by 2031, citing growth in new industries such as EV and battery factories. According to AEP Ohio, new data centers and Intel’s $20 billion planned chip plant will increase strain on the grid. PJM Interconnection, which operates the wholesale power market across 13 Midwest and Northeast states, this year doubled its 15-year annual forecast for demand growth. Its projected power demand in the region for 2029 has increased by about 10 gigawatts—about twice as much as New York City uses on a typical day.

Data centers—like manufacturing plants—require reliable power around the clock year-round, which wind and solar do not provide. Businesses cannot afford to wait for batteries to become cost-effective. Building transmission lines to connect distant renewables to the grid typically takes 10 to 12 years. For these reasons, China is building coal plants and is becoming the world’s dominate provider of the technologies needed for the West’s energy transition.

About 20 gigawatts of fossil-fuel power are scheduled to retire over the next two years, including a large natural-gas plant in Massachusetts that provides electricity during extreme cold when demand increases and renewables falter. PJM’s external market monitor recently warned that up to 30 percent of the region’s installed capacity is at risk of retiring by 2030. An onslaught of costly regulation is making the situation worse as a soon-to-be-finalized Environmental Protection Agency rule (the power plant rule) would require all coal plants and most new natural-gas plants to install expensive and unproven carbon capture technology or convert to hydrogen. New natural gas plants are needed to provide reliable power to back-up wind and solar and replace retiring coal plants.

The Inflation Reduction Act’s hefty renewable subsidies make it harder for fossil-fuel and nuclear plants to compete in wholesale power markets as they can offset up to 50 percent of the cost of solar and wind power. Baseload coal, gas and nuclear plants cannot turn a profit operating only when needed to back up renewables, so they are closing. The United States has already seen the ramifications in Texas’s week-long power outage in February 2021 and the eastern U.S.’s rolling blackouts during Christmas 2022. Biden’s energy transition, forced electrification, and onerous regulations will result in huge electricity prices and an unreliable grid.

Conclusion

Electricity prices are escalating and electricity demand is soaring due to the addition of data centers, AI, heavily subsidized manufacturing, and Biden’s forced electrification and energy transition to wind and solar power. Along with the higher prices, Americans will also face an unreliable grid as onerous regulations are keeping reliable and affordable baseload power from being built to replace forced retirements of existing fossil fuel plants. Electric prices may become the new gas prices when it comes to American elections if Biden’s anti-fossil fuel policies continue and Americans begin to pay more for less reliable electricity.