Trump policies driving up electricity prices

U.S. electricity prices are rising quickly due to new sources of demand, climate disasters, rising costs of equipment, and the Trump administration’s attack on renewables.

Retail electricity rates increased by 4 percent in 2024 from a year earlier, and have averaged 5 percent annual increases since the pandemic. That is up sharply from previous decades, when rates generally rose along with inflation at around 2 percent.

But the U.S. could be on the cusp of even larger jumps in electricity costs. In the first half of the year, utilities requested $29 billion in rate increases, more than twice as much as the same period in 2024 and the largest on record, according to a report from Powerlines.

The spike in electricity rates comes down to a “a convergence of factors,” Rob Gramlich, president of Grid Strategies LLC, a Washington-based consultancy, told Gas Outlook.

He pointed to the rising cost of electrical equipment, which can be viewed as “a leading indicator” of rising rates.

“Switches, breakers, towers, cables. We need a lot of aluminum and steel for all that, and a lot of that is scarce and expensive and affected by tariffs,” he said. “A lot of that is also affected by global demand for electrical equipment,” which has increased in recent years as Europe and other regions accelerate electrification.

President Trump’s tariffs are also imposing costs on that electrical equipment. Some grid components are manufactured in the U.S., but much is brought in from abroad. “A lot of our transformers come from Mexico,” Gramlich added.

Climate disasters are another driver of rising costs. Several consecutive years of wildfires in California have resulted in billion-dollar rate increases in PG&E’s service area. Along the Gulf Coast, hurricanes and other severe weather events have resulted in massive costs to utilities, which then get passed on to customers.

In June, Texas-based utility Oncor proposed an $834 million increase in electricity rates for its customers. The largest driver of the increase was costs related to severe storms. Oncor said it has experienced an average of 31 major storm events annually over the past three years, equivalent to one major storm in its service area every 12 days. Texas has been hit hard from the increasing frequency and severity of climate disasters — a worsening trend driven by the emissions from fossil fuels.

Price volatility for natural gas, which is the largest source of U.S. electricity generation, is another factor in higher electricity costs.

“The increase in retail electricity prices this year comes as the cost of natural gas to the electric power sector was up more than 40% in 1H25 compared with a year earlier,” the U.S. Energy Information Administration rote in a recent forecast. The agency expects the cost of gas used in power generation to rise by another 17 percent in 2026.

Part of the reason for higher natural gas prices is that a growing portion of American gas is exported overseas. Several new LNG terminals have started up or are expected to begin operations in the coming months, including the ExxonMobil and Qatar-backed Golden Pass LNG in Port Arthur, Texas. The U.S. is now sending around 16 billion cubic feet of gas per day to LNG terminals for export, more than 13 percent of total output, and that share is expected to continue to rise.

“We are seeing a little bit higher gas prices and also a national effort to export more natural gas, which has the effect of raising domestic natural gas prices, and then power prices,” Gramlich said.

Then there are data centres, a hot topic across the financial and energy world. Data centres’ share of total electricity consumption could triple to 12 percent in the next three years, up from 4 percent last year. However, forecasts are uncertain and recent speculation that the AI boom is starting to see technological progress stall out has raised fears that the frothy market for AI companies has become a financial bubble that could deflate or bust. Nevertheless, electricity demand for data centres is expected to jump in the coming years.

Data centre demand is still a small portion of total electricity demand, but it is “new and surprising in the quantity,” Gramlich said, which has caught grid planners by surprise. Small increases when there is scarcity can cause a jolt to electricity prices.

Attacks on renewables

The Trump administration is increasing the risk of supply scarcity by attacking renewable energy, which has accounted for 80 to 90 percent of new capacity in recent years. His signature piece of legislation, the so-called Big Beautiful Bill, rolled back most of the financial incentives contained in the Biden-era Inflation Reduction Act. Some estimates say the legislation will cut expected growth in renewables by more than half through 2035 compared to the prior trajectory.

But Trump didn’t stop there. He has begun rescinding already-allocated grants to green energy projects and outright cancelling others. On August 29th, the Trump administration cancelled $679 million in federal funding for multiple offshore wind projects across 11 states. The Department of Energy rescinded a loan guarantee of $716 million for a transmission project associated with another offshore wind project in New Jersey. In an even more shocking move a week earlier, the Trump administration halted the construction of an offshore wind project in Rhode Island — a project that was 80 percent complete.

“This arbitrary decision defies all logic and reason — Revolution Wind’s project was already well underway and employed hundreds of skilled tradesmen and women,” Connecticut Democratic Senator Richard Blumenthal said.

Trump has ordered multiple agencies to go after offshore wind in an attempt to kill the industry, ordering the Department of Health as well as the Department of Defense to come up with reasons to block new projects, according to the New York Times.

Trump has tried to blame rising electricity prices on renewable energy, but by attempting to cut off new supply, he is sowing the seeds of future price spikes.

“I just got back from New England and they’re really scrambling,” Gramlich said. “If offshore wind is going to be completely stopped in its tracks, and that’s what they were depending on, they’re going to have to fill a big gap.” 

“The scarcity now will affect prices and rates in the next few years.”

Trump is also trying to force other countries around the world to consume more oil and gas instead of renewables. “I’m trying to have people learn about wind real fast, and I think I’ve done a good job, but not good enough because some countries are still trying,” Trump said at a cabinet meeting in late August. “I hope they get back to fossil fuels.”

Environmental groups said Trump is to blame for forthcoming price increases.

“This is Trump’s energy price hike in action: deliberate sabotage to strangle cheap, reliable clean energy so fossil fuel executives can keep raking in profits,” Lena Moffitt, executive director of Evergreen Action, a climate policy organisation, said in an August statement. “Electricity prices are already up 10% this year. Now, Trump is forcing a fully permitted, nearly complete clean energy project—one that could save customers up to $1.7 billion each year—to halt construction.”

Key members of his administration are aware that rising electricity prices could become a political liability.

“It’s what I worry about most seven days a week,” Secretary of Energy Chris Wright said on Fox Business Network on September 2nd. “We want to stop the rise in electricity for Americans and reshore jobs and opportunity there.”

Gramlich said renewable energy should be a no-brainer.

“Wind, solar, and storage — love it or hate it, makes up most of the new generation that’s ready to go, that has equipment, that has interconnection, that usually has a contract with a utility,” he said. “If you take out any significant supply source when there’s a shortage then you’re just going to cause prices to go up. I expect we’re going to see that.”

(Writing by Nick Cunningham; editing by Sophie Davies)