Residential electricity prices in the United States are an ever-changing landscape. Ten years ago, residential electricity prices were lower than today at 12.13 cents/kWh. In fact, it has increased by a significant amount in the last decade. But why?
Why does the residential electricity price tend to go up?
We often ask why utility bills, especially residential electricity rates, increase annually. This is primarily due to the rising cost of fuels used to generate electricity and increased demand due to population growth.
While there are renewables like solar, hydro, and wind, natural gas is still the primary energy source. The process involving extraction, conversion, and delivery is costly. Extreme weather conditions also affected electricity production as they affected natural gas extraction.
With more and more people stepping into the residential electricity market, the demand is increasing, leading to an increase in the price of electricity. Additionally, the government has a large say in the price of electricity, and they can put in certain taxes and regulations that can cause the price to go up. Though not directly, the crisis in other parts of the world impacts natural gas availability. For example, the US helps fill the gap and exports more natural gas to countries that reduce their reliance on Russian gas because of the Ukraine crisis, thus decreasing the natural gas used in the country.
What will likely happen in the residential electricity rate in the next ten years?
As a general rule of thumb, electricity prices gradually increase. Based on Energy Information Administration, the 2023 electricity price will increase to 15.45 from 15.07 cents per kWh in 2022. That is a 3.3% increase, and as the agency predicts, electricity rates will further increase in 2024.
It’s safe to say electricity prices will increase in the next ten years unless the demand drops, the energy crisis ends, and energy production costs decrease.
Is solar an alternative?
The good news is that with rising electricity prices, the potential for saving money through solar energy is becoming more and more attractive. Solar energy is an increasingly popular way to save money on monthly electricity bills. If you live in an area where electricity is expensive, your payback period will be quicker than if you live where electricity is cheaper. With the high electricity costs, it is becoming increasingly enticing for people to invest in solar systems and generate electricity.
It would help if you also took advantage of the current Inflation Reduction Act that makes solar panels and home batteries more affordable. But before jumping on your solar journey, this article on the ugly truth about solar can help you determine if solar is for you.
If you’re considering investing and going solar, DroneQuote can help. We help you make informed decisions and show you the best options for investing in solar energy. DroneQuote is a solar fiduciary with your best interests in mind and will ensure you get the best deals and returns on your investments.
Residential electricity prices will continue to go up in the next years; thus, investing in solar energy is a great way to save on energy costs and protect yourself against the volatility of residential electricity prices.