Though the rate of inflation has technically cooled somewhat since its post-pandemic peak in 2022, Americans still find themselves reeling from high prices, especially when it comes to essentials like housing, healthcare, and electricity bills, according to the Washington Post.  

Worryingly, inflation is starting to heat up again, only this time, a cooler labor market has meant wages are not keeping pace with rising costs. 

What's happening?

Nowhere has Americans' struggle to keep up with higher prices been more deeply felt than in rising electricity rates. Since 2019, the price of electricity has increased by 40%, according to the Federal Reserve Bank of St. Louis.  

"I don't think this is a two-month blip on electricity," said Josh Bivens, chief economist at the Economic Policy Institute, according to the Washington Post. "We're in for higher electricity prices for a while, and someone should do something about it. 

The question of why Americans have been paying more and more for electricity has many answers, but they all boil down to one simple economic reality: Demand has been rising faster than supply. 

One of the key factors increasing electricity demand has been the influx of massive, energy-intensive data centers, which are behind technology such as artificial intelligence and cloud computing.

In 2023, data centers consumed a staggering 4.4% of all electricity generated in the United States, a figure expected to rise as high as 12% by 2028, according to the Department of Energy. From 2014 through 2023, data center energy use in the U.S. more than tripled, and it is expected to roughly triple again from 2023 to 2028.  

The Department of Energy has projected that by 2028, total data center electricity use will reach as high as 580 terawatt-hours. That is more than the annual electricity consumption of the entire country of Germany, according to Statista. Germany has a population of nearly 84 million people. 

Meanwhile, new electricity production in the U.S. has not kept pace with this rapidly rising demand, resulting in skyrocketing energy prices for everyone. 

Why do rising electricity costs matter?

Electricity is one of the most fundamental needs that Americans have in the 21st century. For the vast majority of Americans, having electricity is not optional, and while some steps can be taken to reduce energy consumption, a certain amount of electricity is necessary to operate in modern life. As energy costs rise, more and more Americans are having a hard time making ends meet.

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What's being done about rising electricity costs?

Unless AI companies and cloud computing firms stop making more data centers, which is unlikely to happen anytime soon, the only way to keep electricity costs from rising is to bring new electricity production online. 

However, with the current administration having reversed hundreds of billions of dollars of subsidies and other incentives aimed at expanding renewable energy production, the supply simply cannot keep up with the demand.  

Bivens, the Economic Policy Institute economist, has suggested mandating that companies that build data centers pay for new power generation facilities. He also recommended extending previous financial incentives for renewable energy production, according to the Washington Post. 

To help spur political action on expanding renewable energy production, you can use your voice, contact your elected representatives, and vote for political candidates who share your views on renewable energy. 

To go even further, you can help expand electricity production by installing solar panels on your roof. Not only will this drop your electricity bill to practically zero and insulate you from rising energy costs, but it will also help to reduce the demand for power from the electrical grid. 

EnergySage makes solar easy with powerful online tools that allow you to compare quotes from vetted installers in your area and to take maximum advantage of rebates and other incentives, saving customers up to $10,000. 

However, with federal tax credits for home solar ending Dec. 31, you must act fast to take advantage of thousands of dollars in potential savings. 

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