Why is electricity so expensive?

April 10, 2023
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For many people,  rising electricity costs can be a source of major financial strain.  In the United States, electricity prices have been steadily increasing for decades, and even as costs for production decline, energy continues to remain costly.

One of the primary reasons for  expensive electricity costs is the rising demand for fuel. Electricity is still largely generated through the burning of fossil fuels, such as coal and natural gas. According to the EIA U.S. Energy Information Administration over 60% of our energy supply is still derived from fossil fuels. Natural gas is at the top of the fossil fuel energy sources supplying just under 40% of all electricity to the U.S.

Global conflicts have hindered the supply even further with Russia cutting off the fuel supply to Europe, leaving Europe turning to the U.S. to fulfill their natural gas demand. Europe’s main source of energy is from nuclear power making up 25% of Europe’s sourced energy supply followed by natural gas making up for 20% of Europe’s energy supply. As the demand for energy increases, the price of these fuels increase, forcing up the cost of electricity. This is especially true in areas where the supply of electricity is limited and the demand is high, such as in some parts of the United States like Texas and California.


Costs to produce fossil fuel energy are declining but  another factor contributing to the pricing increase of electricity is the delivery of energyAging infrastructure and capacity constraints due to grid instability and outdated equipment are costly expenditures that suppliers are leaning on the consumers to front the costs. As the cost of materials and labor goes up, so too does the cost of electricity generation.

The cost of electricity has also been  pushed up by the shift toward renewable energy sources.  Increasingly politicians, businesses, and individuals are turning to renewable sources of energy, such as solar and wind power, to supplement or even replace traditional sources of electricity. While these sources are generally much more cost-effective in the long run, they come with high upfront costs. In order to pay for these investments, electricity providers are passing on the costs to consumers.

In addition, the  cost of electricity is influenced by government policies and regulations. In some cases, governments subsidize the production of electricity, forcing prices down artificially. This can lead to short-term savings, but it can also create distortions in the market and lead to long-term price increases. Other policies, such as those that require utilities to purchase a certain amount of power from renewable sources, can also push up electricity costs.

In order to mitigate the rising cost of electricity, consumers have a few options. First, they can try to  reduce their electricity usage by making their homes and businesses more energy efficient. This can be done by investing in energy efficient technologymonitoring & maintaining electrical powered equipment & systems, and reducing the amount of electricity used during peak demand times. Additionally, consumers can consider switching to a supplier that offers more competitive rates or a renewable energy provider that offers lower costs over the long run.

In short, electricity costs are on the rise.


Allow FridgeWize to reduce your consumption and benefit from major energy savings! Contact FridgeWize today to schedule a FREE energy saving review.