Americans are fed up with five years of sharply rising electricity prices. Left unchecked, this will worsen, and not because of skyrocketing oil costs, as oil accounts for one percent of U.S. electric power, or data centers, which currently consume five percent of electricity.
America’s electric power policy-making process is broken. There are vicious local and national political fights, e.g., natural gas vs. offshore wind.America needs to expand and modernize its electric system. This means rapidly building power plants and transmission infrastructure to increase supply, lower cost, and improve distribution. It means cutting staggering amounts of red tape for both and embracing all forms of power generation: coal, natural gas, nuclear, wind, solar, hydro, and others.The good news is that there are companies willing to invest tens of billions immediately in the electric grid to expand the power supply and lower prices. The tech companies rapidly building data centers are already doing it.On March 5, Entergy announced “$5 billion in customer savings delivered by data center agreements” for its customers in Arkansas, Mississippi, and Louisiana. Entergy “proactively worked with our state leaders to recruit a new industry with attractive power agreements that benefit our existing customers,” said company CEO Drew Marsh.This is a sea change from what has been happening throughout the U.S. For more than five years, and well before the AI boom started, electricity prices have been rising faster than inflation.According to the Federal Reserve, nationwide electricity prices rose 39.0 percent from January 2021 to February 2026, compared with the underlying inflation of 24.9 percent.During President Donald Trump’s 14 months in office, the data center boom has taken off, and electricity prices have risen 5.6 percent compared with the underlying consumer price increases of 2.9 percent. That is a significantly lower electricity price increase than in the Biden Administration, but a bigger spread to general inflation.The American experience, however, is dramatic falling electricity prices over the past 125 years.A 2020 study by the Institute of Electrical and Electronics Engineers (IEEE) found, “A dollar now buys nearly 44 times as much electricity as it did in 1902.” In constant dollars, the price of electricity fell 97 percent from 1902 to 2019.IEEE warned that the growth of renewable power was driving prices higher, noting that prices more than doubled in Germany during its 15-year push for renewables and 60 percent in California, which took similar steps. According to the Organisation for Economic Co-operation and Development, European Union (EU) customers now pay 50 percent more for electricity than U.S. consumers. The EU has been more aggressive than the U.S. in the past 20 years in closing fossil and nuclear plants and building renewables.Adding renewables, though, can be part of a low-cost electricity portfolio. Texas has 10 percent of our country’s data centers, second to Virginia. Texan electricity prices, however, are 10.1 percent below the national average.Texas’s electricity sources are natural gas (51%), wind (22%), coal (12%), solar (8%), and nuclear (7%). The high amounts of wind and solar, which in Texas are twice the national average, show that in the right locations, renewables make compelling economic sense for construction.Conversely, New York shows how quickly things unravel with fights over fuel types. It was only after aggressive pressure from the Trump administration that Gov. Kathy Hochul allowed a major natural gas pipeline. The Trump administration, however, stridently opposes five nearly completed offshore wind projects that would provide needed power to New York and Virginia. New Yorkers pay 59 percent more for electricity than the rest of us.America’s permitting process is also broken. In addition to delays for new plants, according to a 2024 U.S. Department of Energy report, transmission grid improvements take an average of 10 years.This means power gets bottled up, taking longer to get where it is needed while putting added wear and tear on transmission equipment. Companies typically plan for eight years of regulatory review and two years for construction.Federal permitting reform to speed up new plants and transmission grid improvements has a path for passage by Congress this year. All types of power sources, including renewable projects, are delayed.Also essential are state regulatory and energy company discussions about specific investments tech companies are making and how that can be tied into sensible, much-needed construction that will benefit all consumers.It is time to invest and build. The guidance and experience of Texas and other southern states offer lessons and an encouraging path forward.
