Unless you’ve been leaving under a rock, you’ve probably noticed that electricity is pretty expensive nowadays. And all of us are wondering why.
Electric rate hikes happen as a result of different factors, from a rise in energy demand and spikes in the price of fuel to the artificial intelligence revolution that is currently underway. Modernizing the decades old grid so it continues to support our needs is also not cheap.
Some skeptics even argue that solar energy could be to blame for these price increases.
But when it comes to utility rate hikes, there is a lot of nuance to the story and understanding what causes these price increases gives consumers more knowledge over what is going on with their taxpayer dollars and their energy distribution.
In this article, we will explore the underlying factors at play behind electric rate hikes in 2025 and how solar is actually part of the solution and not the problem itself.
What is Causing these Electric Rate Hikes?
One key aspect of these massive rate hikes is the need for grid maintenance driven by growing energy demand and a lack of transparency from institutions responsible for our energy distribution.
As the years go by, one thing is for sure: we need more electricity than ever before and for a number of reasons. For one, the advent of AI didn’t just come with AI assistants to streamline processes, answer questions and make our lives easier. It also came with massive data centers that are responsible for powering artificial intelligence tools and what do these data centers run on? Electricity. And gone are the days when all you had to do was turn the lights on and power up a TV in your house. Between electric vehicles, security systems, smart home devices and larger than life entertainment systems, we are constantly using electricity. And this doesn’t even include seasonal energy spikes from increased air-conditioner usage in the summer or heating in the winter.
The problem is that our energy needs are rising at a speed that the grid just can’t keep up with. The electric grid in the United States was built over 60 years ago and it is severely underprepared for today’s energy demands. But utilities responsible for maintaining the grid are overcharging consumers consistently and not being clear on where that money is going. For example, according to a study by Grid Strategies, spending on transmission projects skyrocketed in 2023 but only 55 miles of new transmission lines were built that year, compared to the 4000 miles that were built in 2013 (at a time when utility rates were much less than they are today).
Similarly, the electric grid operator PJM is causing controversy after its capacity auction last year led to a whopping $14.7 billion bill for the 13 states it covers (and Washington D.C.). Critics say that PJM favors expensive, fossil fuel plants and neglects clean sources of energy like solar and wind since they are weather-dependent and thus not considered as readily available as fossil fuel based sources. Meanwhile, there is around 286 GW of clean energy ready to be added to the interconnection queue that could save consumers up to $7 billion. But slow processing and stakeholder conflicts keep getting in the way.
Why Solar is Not to Blame
Utilities are blaming solar energy for these rate hikes by relying on a concept called the solar cost shift. Here is their argument in a nutshell: since rooftop solar owners generate most of their own electricity, they rely less on grid electricity (and therefore pay less in electric bills). To keep revenue flowing so they can continue to support the grid, utilities have no choice but to raise prices on non-solar owners to make up the difference. Basically, non-solar owners literally have to pay the price so that solar owners can continue to benefit from solar energy.
But besides its money-saving perk, rooftop solar actually helps to clean up the grid by reducing reliance on fossil fuels and promoting a healthier environment. It also helps to ease peak demand which directly counters the solar cost shift idea. Here’s how: on hot summer days most people are using their ACs and this puts added stress on the grid. However, since some households generate their own electricity using solar, this helps reduce the pressure on the grid and the need for expensive power plants to keep up with this high energy demand. Ultimately, this reduces operational and infrastructure costs for the grid and proves that solar actually helps lower costs for consumers, not the opposite.
Here’s What Needs to Happen
Yes, utility rate hikes show no signs of stopping anytime soon. But rooftop solar is not the culprit here and the actual reasons behind it need to be addressed. What is needed is more transparency from utilities and grid operators regarding what exactly they are doing with their funds. Allowing state governments and other stakeholders to be more involved and provide oversight (in a collaborative approach) would help ensure that funds raised by utilities are being used correctly.
Moreover, raising awareness about the value of rooftop solar will continue to benefit the grid and communities in general. With state financial incentives still available and the 30% federal tax credit still active until December 2025, there are plenty of options to help people go solar. The more people join in on the solar movement, the more people will save on their electric bills and the more resilient and affordable the grid will be.
Are you ready to go solar and start saving money and your community? Book a consultation here or reach out to our team and we will gladly answer all your questions.