Why are energy prices going up?
The high costs of dirty energy
It probably comes as no shock (pun intended) that energy prices are indeed going up, and they have steadily risen over the past decade. And really, what prices aren’t going up right now? Even between 2021 and 2022, energy prices have increased another 2.5% above the already near-record prices.
However, could there be relief on the horizon? Here’s what you need to know about the cost of energy in the modern age.
What’s causing energy prices to go up?
The two most common sources of energy are natural gas and coal. They’re responsible for producing 2.479 trillion kWh of energy in the U.S. alone! Unfortunately, it also costs money to produce and transport those resources to the power plant, not to mention to keep the power plants running.
The rise in cost is two-fold. First, costs are increasing across the board. With the cost of everything rising lately, that includes natural gas and coal, along with the fuel and energy to transport the resources.
The second reason costs are rising is because of availability. Natural gas and coal are finite resources. They can only be procured in specific parts of the world. With tense international relations between Russia (one of the largest producers of natural gas) and changing government regulations, prices have skyrocketed because of lower supply of resources.
The economic impact of high energy bills
As if everyone wasn’t struggling enough with over 8.5% inflation across the board, the increased cost of energy has put another stressor on the average household.
According to data the Energy Information Administration (EIA), the average residential electricity rate was up by almost 8% in January 2022 compared to the previous year. This was officially the largest increase in over a decade! In some states like Hawaii, New York, and Florida, energy rates increased by a whopping 15%.
To make matters worse, those are winter prices. Summer energy prices are typically even higher.
With the cost of everything from groceries and fuel to heating oil and homes, the increase in energy prices have really put a damper on household budgets. Your hard-earned dollars just aren’t going as far as they used to.
Will electricity prices go down?
According to trends, it doesn’t look like energy prices will be going down any time soon. The EIA estimates that the cost of electricity will continue to rise by about 2.5% in the next year. This is mostly because of the rising cost of natural gas. Expect to pay around 14.6 cents per kilowatt-hour for your energy needs in the upcoming year — which is a 6.1% increase from one year ago.
Best ways to reduce your energy bill
Looking at the data, the biggest reason behind the rising cost of electricity is the price and availability of resources like natural gas and coal. Well, what if we didn’t have to rely on finite resources for our energy needs? There are several renewable energy sources that are becoming more and more viable to power our homes. One of which is solar power.
With the advancement of technology, solar panels are now more efficient and affordable than ever. What that means for the average consumer is that cheaper energy is possible! Here are two of the most common ways U.S. households are benefitting from solar energy and cutting their electricity bills:
Community solar
That little $20,000 installation bill isn’t something that many households can afford. And if you don’t live in a home that’s considered “solar ready,” you can’t install solar panels anyway — for example, renters or people who live in condos. Does that mean you just have to live with the high costs of dirty energy? Not at all!
Community solar is a great way for almost anyone to benefit from clean, renewable, and affordable solar energy without the massive upfront costs. It’s essentially a shared solar utility. A solar farm is built in a suitable location and pumps energy back into the grid. Local residents then pay a fee (typically a subscription) to help maintain the community solar project and get a credit on their utility bills.
All subscribers get a discount on their regular utility bills and can enjoy the knowledge they’re helping to save the planet by limiting their dependence on natural gas and coal energy.
Rooftop solar
When you think of “going solar,” you probably jump to installing solar panels on the roof of your house. This is a great way to harness the infinite power of the sun to generate electricity for your home.
In fact, many solar users can completely eliminate their dependence on “dirty energy” from the utility company, and others can even produce more power than they use, selling the excess back to the utility with net metering.
While rooftop solar is definitely the best way to completely break away from natural gas and coal, it does come at a cost. Solar installations can be very expensive, with the average installation landing around $20,000!
There might be a rough sticker shock to get through, but going solar isn’t a cost; it’s an investment. Once installed, you won’t have to pay rising electricity costs. That means every time there’s a price hike, you can keep more money in your pocket.
The average payback period on a solar installation is about 8.7 years. Plus, there are several solar incentives to help offset the price of a solar installation — and the knowledge that you’re helping the planet by reducing our dependence on fossil fuels will make you feel all warm and fuzzy inside.
Ready to cut your dependence on dirty energy?
It doesn’t seem like there’s much relief on the horizon when it comes to the price of electricity. For households looking to save on their utility bills to keep more money in their pockets, solar power is a viable alternative.
Whether you prefer to install solar panels on your roof or join a community solar project, you can limit your dependence on natural gas and coal power, helping you avoid future price hikes and keep energy bills low — or even nonexistent! Find out if there’s a community solar project near you and see how much you can save on your energy bills.
