Politicians on both sides of the aisle are wrong about what’s causing rising electricity prices, according to a study published online earlier this month by the Lawrence Berkeley National Laboratory and the Brattle Group.
Researchers studied the issue over a five-year period, from 2019 to 2023, and found that beyond economy-wide inflation, prices rose because of the costs of “poles and wires” as utilities upgrade aging infrastructure, along with extreme weather recovery and mitigation.
They also found that higher electricity demand can lead to lower prices.
“It’s contrary to what we’re seeing in the headlines today,” Ryan Hledik, principal at Brattle and a member of the research team, told the Washington Post. “This is a much more nuanced issue than just, ‘We have a new data center, so rates will go up.'”
Energy Secretary Chris Wright this summer blamed solar and wind subsidies for rising costs.
In New Jersey, where electricity prices rose 22% last year alone, Assemblywoman Andrea Katz has sponsored a bill that would impose a surcharge on data centers and use the money to modernize the region’s electrical grid.
Sen. Josh Hawley, R-Mo., earlier this month said data centers are “massive electricity hogs.”
“That’s why Silicon Valley wants more transmission lines, solar farms and windmills. Somebody has to pay for it all – and don’t believe any politician who says it won’t ultimately be you,” he wrote on X.
Electricity costs in the U.S. were up 5.1% in September compared to a year earlier, according to the Bureau of Labor Statistics, but higher in some states.
When adjusted for inflation, though, 31 U.S. states saw their prices decline, while the other 17 experienced increases, according to the study.
In California, for example, utilities have added billions of dollars in wildfire-recovery costs and mitigation programs to retail electricity prices in recent years.
“The West, led by California, is in a really difficult situation,” Devin Hartman, energy and environmental policy director at the R Street Institute, told the Post. “There’s really high costs to mitigating risks from those kinds of events.”
The report also said the growth of data centers has helped lower retail electricity prices but not everywhere depending on whether those operations require new power plants.
“If big tech and their data centers were to blame, you’d expect states like Nebraska and Iowa — where Google is building its largest cluster of data centers — to have some of the fastest growing rates,” Michael Thomas, founder of Cleanview and author of the Distilled newsletter, wrote recently.
“But inflation-adjusted rates were negative in both states.”
Electricity bills did rise in some states where policies aimed at boosting clean energy were implemented, according to the study.
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