How much do electricity prices increase per year in the U.S?

Why Are U.S. Electricity Prices Increasing & Should I Switch to Solar?

Electricity prices increase every single year. But just how much have they increased in recent years and why do electricity bills seem to be getting higher and higher, even though many Americans are becoming more energy conscious?

In this article, I will cover some basic historical information on U.S. electricity prices, their rate of increase. I will also cover why Americans have started to see higher-than-normal electricity bills over the past two years. And lastly, as a solar installation company, I will also discuss how increasing electricity prices have impacted people’s decision to switch to solar.

When you consider solar panels for your house, the future cost of electricity is a significant concern and should be weighed into the picture.

According to the U.S. Energy Information Administration (E.I.A.), electricity rates have increased by an average of 2.9% annually in the United States over the last 25 years. However, recent inflation over the past two to three years has sent electricity prices far higher than expected. Unfortunately, predictions from some of America’s most prominent news sources say electricity prices will continue to increase. With electricity bills on the rise, thousands of homeowners have started to consider solar as the most effective way to immediately reduce electricity costs and break free from continually increasing electricity prices. 

“Electricity bills may continue to shock you even as overall inflation eases.”

“High Electricity Prices Will Go Even Higher Unless We Change Course.”

“US Power Prices Rise Most in 41 Years as Inflation Endures.”

Article Highlights

  • Since the mid-1980s, the U.S. electricity price has increased by 2.36 percent yearly. The average homeowner can expect electricity prices to increase by about that amount every year.
  • 2021 and 2022 saw highest ever electricity price increases in forty years due to inflation and other factors.
  • Most major news sources in America predict electricity prices will continue to increase significantly, making solar a viable option for home owners who want to save on electricity costs.
  • Some states, such as Hawaii, Kentucky and California have seen the largest increases in electricity prices.
  • There is no way of knowing for certain if electricity prices will increase due to climate change or grid upgrades.
  • Solar panels can help reduce the uncertainty of future electricity costs because they are more predictable in terms of their long-term production estimates.
  • The benefits of solar panels and why all homeowners should consider switching to solar as way to avoid paying high electricity bills in the future. 

So, Just How Much Are Electricity Prices Increasing?

In a recent article, the E.I.A. stated that 2021-2022 saw one of the most significant increases in forty years, at a staggering 13%, and that 2022-2023 (the latest year for which data are available) saw an increase by 11%. These are the highest increases the U.S. has seen in over 40 years.

The average monthly electricity bill for residential customers in the United States increased 13% from 2021 to 2022, a 40-year high. 

Electricity prices increase graph

Electricity Rate Increase State-by-State from 1997-2022

Hawaii, Kentucky, California, Wisconsin, and Massachusetts were the five states that saw the highest electricity price increases in the last 25 years. On average, electricity rates in these states have increased between 3.30% to 4.36%.

New Jersey, Arizona, and Delaware were the bottom five, with an annual growth rate between 1.33% to 1.69%.

25 states have rates of increase below average, and 25 (plus the District of Columbia) with rates of rise above average. This graphic shows the average electricity cost in each state, then a list of the highest and lowest rates of growth, with the U.S. average in the middle.

Electricity Prices Increase by State

Map courtesy of

Why Are Electricity Prices Increasing?

Electricity prices are affected by many factors. Electricity prices reflect in general the costs of building, financing, maintaining, and operating power plants, as well as the grid, (the complex network of power distribution and transmission lines). Electricity prices are often influenced by the financial return to owners and shareholders. According to the E.I.A., these are the main factors that impact electricity price increase:

Fuel prices, especially for natural gas and petroleum fuels (mainly in Hawaii and villages in Alaska), may increase during periods of high electricity demand and when fuel supply constraints or disruptions occur because of extreme weather events and accidental damage to transportation and delivery infrastructure. Higher fuel prices, in turn, may result in higher costs to generate electricity.

Power plant costs:
Each power plant has financing, construction, maintenance, and operating costs.
Transmission and distribution system: The electricity transmission and distribution systems that connect power plants with consumers have construction, operation, and maintenance costs, which include repairing damage to the systems from accidents or extreme weather events and improving cybersecurity.

Weather conditions:
Extreme temperatures can increase demand for heating and cooling, and the resulting increases in electricity demand can increase fuel and electricity prices. Rain and snow provide water for low-cost hydropower generation, and wind can provide low-cost electricity generation when wind speeds are favorable. However, when droughts or competing demand for water resources occur or when wind speeds drop, the loss of electricity generation from those sources can put upward pressure on other energy or fuel sources and prices.

In some states, public service (utility) commissions fully regulate prices, and other states have a combination of unregulated prices (for generators) and regulated prices (for transmission and distribution).

How To Factor in Electricity Price Increases When Cosnidering Solar Panels

If you want to calculate how much money you could save with solar panels, you need to know the historical rate of electricity price increases.

There are online calculators that can accurately tell you how much electricity a solar panel will produce in your first year. These tools calculate energy production depending on your location, roof tilt, and shade. 

Multiply the estimated production for one year by the current utility rate, and you can find out how much you could save in the first year. You won’t know how much the rate will increase over the next 25 years if you don’t have a good estimate.

Or if that sounds like a lot of work, you’ll be happy to know that at Expert Solar, we factor electricity rate increase into every solar estimate and proposal we give., saving you the time and headache trying to figure it out. 

Continuous Electricity Price Increases vs Solar Panels

This article explains that electricity prices can increase annually for several reasons. These may include inflation, rising fuel costs for traditional energy sources (such as coal, natural gas, and oil), higher operation and maintenance costs at power plants, investment in infrastructure upgrades, regulatory changes, population growth, or economic expansion, as well as an increase in demand from population expansion or economic expansion.

When electricity prices rise, homeowners usually have to pay more for their energy usage. Installing solar panels can be a good way to combat this trend because:

1) Long-term Cost Savings: The sun’s energy is free, so once the initial cost of the solar panels is paid off, the ongoing cost of generating electricity is very low. This can lead to significant savings over time, especially as electricity prices rise.


2) Predictable Costs: Solar systems can provide a fixed, predictable electricity cost, especially when paired with a home battery storage system. The amount of energy a solar system can generate is relatively predictable based on the sunlight your location receives, allowing for more precise budgeting.


3) Energy Independence: Solar panels reduce dependence on the local power grid and traditional energy sources. This insulates homeowners from rising electricity prices and potential grid disruptions.

Other Benefits of Switching to Solar

Reduced Energy Bills:
The most immediate benefit is decreased energy costs. After installing solar panels, a home can generate a portion (or possibly all) of its electricity, significantly reducing monthly utility bills.

Potential for Net Metering:
In some areas, homeowners with solar panels can use net metering programs where excess electricity generated by their panels is fed back into the grid. The homeowner is then credited for this power at the retail electricity rate, further reducing their energy costs.

Increase in Property Value:
Homes equipped with solar power systems often have higher property values than similar homes without solar. This could be a significant advantage if the homeowner decides to sell the property.

Environmentally Friendly:
Solar energy is a renewable resource, which makes it more environmentally friendly than traditional energy sources. Solar power allows homeowners to reduce their carbon footprint and contribute to a sustainable future.

Federal Tax Credits and Incentives:
In many countries, including the U.S., the government offers tax credits for installing solar panels, which can help offset the initial cost.

Long Life Span:
Solar panels have a long lifespan – often 25 years or more – and require minimal maintenance, which makes them a good long-term investment.

How Expert Solar Can Help

At Expert Solar, we’re passionate about helping homeowners tap into the sun’s limitless power to secure their energy futures. We understand the burden of rising electricity rates, so we’ve dedicated ourselves to providing affordable, high-quality solar installations to help you cut your energy costs. With our competitive estimates and various financing options, going solar has never been easier. Our expert team handles the installation process from start to finish, ensuring a hassle-free experience. And, with our high customer satisfaction track record, you can have confidence in our commitment to your needs. To show our commitment, we’re offering free estimates to all homeowners. It’s time to harness the sun and avoid increasing electricity rates. With Expert Solar, you’re not just getting a solar installation but investing in a brighter, greener future. Start your path to energy savings today by scheduling a free solar consultation. 

Ricardo Del SolArticle by
Ricardo Del Sol
Editor, Expert Solar
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