While gas stations signs display the price of diesel to drivers every day, heating oil – a near-identical product used for home heating – is also hitting record high prices due to global conflict. But, unlike diesel, heating oil’s inflationary pressure flies under the radar since most homeowners only fill their home oil tanks two to four times a winter.

Despite avoiding headlines, the price of heating oil (also known as fuel oil) threatens to make this the most expensive winter ever for families heating their homes in the Northeast United States and Alaska.

The October 14th Consumer Price Index release reported that surging energy costs inflated overall prices by nearly 4 percent over the past year and found fuel oil prices increased 74.2 percent from September 2025 to 2026.[1] And as of the U.S. Energy Information Administration’s (EIA) October 15th release, prices for residential customers averaged $6.14 a gallon, a 73-percent increase from the $3.54 per gallon cost a year prior.[2]

The EIA estimates this means each household will pay $230 to $590 more to heat their home this winter, even if the season is milder than last year.

War, corporate profits, global price volatility cause high diesel and fuel oil prices

Several factors are causing this heating oil price increase to hit homeowners:

War in the Middle East has disrupted oil passage through the Strait of Hormuz and the Bab al-Mandab Strait;

Global refinery capacity is tight, in part due to Russia’s war in Ukraine and because U.S. refineries delayed maintenance throughout 2026 to capture elevated profit margins;

Diesel is traded on a global market, and corporations seek the highest possible profits, so U.S. consumers face similar price volatility to buyers around the world

This rise in global conflict has highlighted that even though the U.S. produces and exports the most oil in the world, fossil fuels are global commodities and are subject to significant daily and seasonal price spikes, all out of the control of everyday consumers.

Home heating bills could cost up to $2,700 this year

Exactly how high home heating bills will go this year depends on three main criteria: the fuel you use for heating, the price of that fuel, and how cold it is this year in your area.  

Heating oil is mainly used in the Northeastern U.S. and in Alaska, and 10 states compose 80 percent of all American households using the fuel.[3] Excluding these states – New York, Pennsylvania, Massachusetts, Connecticut, Maine, New Hampshire, Rhode Island, Vermont, Alaska, and Delaware – only 1 percent of households heat with fuel oil. New Yorkers have one fourth of homes heated with fuel oil, and over half of Maine homes rely on it.

While electricity prices are determined months or years in advance for most households, diesel and fuel oil prices change daily. This means homeowners relying on the fuel can’t know exactly how much they’ll pay for a fill up until the day of delivery, when even before the Iran War, one in three households struggled to pay energy bills.[4] However, forecasts can help families budget.

The U.S. EIA estimates fuel oil consumers will pay an average $5.26 per gallon this winter, a 34-percent increase from last year.[5] That comes out to $2,115 per household, a 21-percent increase year-over-year, under the assumptions that oil prices will fall soon and that this winter will be warmer. If oil prices remain elevated and prices hold steady at current levels, households would see winter bills surge to between $2,300 and $2,700, depending on the weather.

Homeowners can lower heating bills with electrified appliances, rooftop solar, energy efficiency

Households with electric heating have the lowest annual energy expenditures. In 2020, consumers living in electrically heated homes spent $1,280 less on energy than those living with fuel oil heaters, about 44 percent less.[6] That is in part because of geography, but also because electric heating is much more efficient than furnaces or boilers burning fuel.

Heat pumps are the most efficient home-heating appliance and work like a bi-directional air conditioner, cooling your home in summer but heating it in the winter. Heat pumps use about half the energy of other heating sources, consuming electricity to transfer thermal energy into and out of your home, rather than burning gas or oil to create thermal energy.[7]

Heat pumps are most popular in the Southeastern U.S. but are growing in popularity in colder states like Maine. In 2019, the Maine legislature set a goal of 100,000 heat pump installations by 2025, and the state reached that goal two years early in 2023. Consumer rebates and trade support policies helped the legislature achieve this target.[8] Other states aiming to reduce homeowners’ dependence on expensive heating oil can use similar mechanisms that lower the upfront cost of tank replacement and heat pump install.

Homeowners can go electric by speaking with local HVAC contractors or purchasing appliances through major retailers like Home Depot, Lowes, and Ace Hardware. For consumers in cold-climate areas, Northeast Energy Efficiency Partnerships – a nonprofit accelerating heat pump adoption in eight of the top ten heating oil states – houses the Cold Climate Air Source Heat Pump Product List and Specifications, which provides data on products’ efficiencies and heating/cooling capacity at various temperatures.[9]

Fall is peak season for heat pump installations, which are often a fit for homeowners replacing old furnaces because they also work as air conditioners and can lower monthly utility bills all year. Homeowners can redirect savings budgeted for fuel tank refill towards new appliances, rooftop solar, and energy efficiency improvements to lower bills.

[1] United States Bureau of Labor Statistics, “Consumer Price Index Summary,” U.S. Bureau of Labor Statistics, October 2026, https://www.bls.gov/news.release/cpi.nr0.htm/.

[2] United States Energy Information Administration, “Heating Oil and Propane Update,” U.S. Energy Information Administration, October 2026, https://www.eia.gov/petroleum/heatingoilpropane/#itn-tabs-2/.

[3] United States Census Bureau, “B25040 | House Heating Fuel,” U.S. Census Bureau, October 2026, https://data.census.gov/table/ACSDT1Y2022.B25040?q=B25040:+HOUSE+HEATING+FUEL&g=010XX00US,$0400000&d=ACS+1-Year+Estimates+Detailed+Tables&moe=false/.

[4] Diana Hernández, “New Federal Figures Reveal 1 In 3 U.S. Households Struggle To Pay Energy Bills, But The Reality Is Likely Even Worse,” The Conversation, April 2026, https://theconversation.com/new-federal-figures-reveal-1-in-3-us-households-struggle-to-pay-energy-bills-but-the-reality-is-likely-even-worse-279627/.

[5]  United States Energy Information Administration, “Short-Term Energy Outlook:  Winter Fuels Outlook 2026-27,” U.S. Energy Information Administration, October 2026, https://www.eia.gov/outlooks/steo/report/perspectives/2026/10-winterfuels/article.php#expend

[6]  United States Energy Information Administration, “Short-Term Energy Outlook:  Winter Fuels Outlook 2026-27,” U.S. Energy Information Administration, October 2026, https://www.eia.gov/outlooks/steo/report/perspectives/2026/10-winterfuels/article.php#heatingestimates/.

[7]  United States Environmental Protection Agency, “Heat Pumps,” U.S. Environmental Protection Agency, February 2026, https://www.epa.gov/burnwise/heat-pumps/.

[8]  Steven Nadel, “Transforming Residential Space heating: Learning From Leading States,” American Council for an Energy-Efficient Economy, 2024, https://www.aceee.org/wp-content/uploads/ssb2024/20240722160817047_50aa9192-e53f-4eba-b0a9-3f29571ab1ab.pdf

[9] Northeast Energy Efficiency Partnerships, “Heating Electrification,” Northeast Energy Efficiency Partnerships, https://neep.org/heating-electrification/ccashp-specification-product-list/.

The post Fossil Fuels Are Making Household Heating Bills More Expensive appeared first on Energy Innovation.

Despite avoiding headlines, the price of heating oil threatens to make this the most expensive winter ever for families heating their homes in the Northeast United States and Alaska.
The post Fossil Fuels Are Making Household Heating Bills More Expensive appeared first on Energy Innovation.[#item_full_content]

Households In Every State Will Pay More for Energy Under New Policy Choices

It’s no secret energy costs are skyrocketing – Americans are feeling pain at the pump when they fill up their cars and are facing hard choices every time a utility bill arrives.

The Iran War has become a common excuse, and while it has certainly raised gasoline prices,[1] a more pervasive reason is driving the affordability challenges facing Americans: Dramatic changes in federal energy policy coming from Washington, D.C.

A mix of executive and legislative action by the Trump administration and Congress has repealed pollution guardrails for fossil fuel power plants, eliminated emissions standards for gas-powered vehicles, cut incentives for cleaner hydrogen production, built artificial barriers for states and utilities that want to build cheap solar and wind energy projects, and terminated tax credits for clean energy. 

Analysis from Energy Innovation[2] spells out what these shifts will cost the U.S. economy and how they’ll impact energy affordability for Americans for years to come. The news is dire, and unfortunately only on a path to get worse unless federal elected officials make better policy decisions.

How Federal Policy Changes Affect the Lower 48 State

Energy policy in the United States has been completely overhauled since January 2025 when the Trump administration and 119th Congress took office. Modeling shows policy choices made since[3] then are significantly harming America’s economy and increasing energy prices for households and businesses — ranging from electricity prices, to job growth, to vehicle and housing costs, all the way to lost opportunities for green hydrogen production.[4]  

By using all federal energy policies that were cutting costs, cleaning our air, and generating new jobs and investments in January 2025 as a “frozen in time” baseline, EI’s analysis compares what would have happened to energy prices, economic activity, and public health between 2025 and 2040 to what will now happen due to federal policy choices. It assesses a range of implications for how these changes will impact Americans living in the lower 48 U.S. states.

Nationwide, households in every state will pay more for energy – an additional $920 billion through 2040, or $6,500 per household. Several states will be harder hit, paying more than $9,000 per household. Gas will also be 93¢ more expensive per gallon by 2040, America’s workforce will lose an average of 390,000 lost jobs per year, and the economy will miss out on $1.3 trillion in cumulative GDP while accumulating $72 billion in additional healthcare costs. 

EI’s modeling factors in major changes to federal policy during this time, including eliminating clean energy and electric vehicle tax credits through the One Big Beautiful Bill Act[5] (OBBBA); the Environmental Protection Agency’s (EPA) repeal of air and power plant wastewater standards; reversing federal tailpipe pollution standards for gas-burning vehicles; and other policies chipping away at diverse production of wind, solar, and green hydrogen.

The analysis holds state-side policy constant, except for the impact of §177 Congressional Review Act resolutions (which otherwise would have allowed states to adopt stronger vehicle emission standards). While higher gasoline prices due to the Iran War is factored into EI’s projections, tariffs are not included in the modeling, so the assessment of increased costs – particularly on households – is conservative.

The Five “Biggest Losers” On Household Energy Costs: Oregon and Mississippi Pay The Most

The burden of higher energy bills from Trump administration and Congressional policies won’t be shared equally, among households, or between states – households in the hardest-hit states could pay as much as $1,200 more per year.

The five states facing the highest household energy bills increases are:

Oregon ($9,300)

Mississippi ($9,100)

South Dakota ($9,000)

Virginia ($8,900)

Wyoming ($8,900)

These costs will grow over time as demand for expensive fossil fuel rises, pushing up average prices. For instance, U.S. gas consumption will jump 4.6 percent.[6] from the Trump administration’s repeal of vehicle fuel economy standards, pushing lifetime vehicle fuel costs by more than $1,600.

Average national energy spending increases almost triple from 2030 to 2040, jumping from $230 per household per year to $780 per year. Transportation makes up the lion’s share of these higher energy costs, a projected 87 percent of overall increases by 2040, as the price of gas rises everywhere.

Which States Will Suffer The Worst Economic Damage From Lost Jobs And GDP?

America’s clean energy industry has been an economic engine in recent years, reaching 3.5 million workers by the end of 2024 and growing three times faster than the broader U.S. economy.[7] Federal policies throw that engine in reverse across the clean energy industry and electric transportation manufacturing, as well as industrial segments providing clean heat, green hydrogen, and other clean technologies. 

Nationwide, EI models show that federal energy policies alone will cost the U.S. about 390,000 jobs per year on average and a cumulative $1.3 trillion in GDP losses — adding up to 6.2 million lost job-years nationally.

Five states will suffer the biggest hit to their statewide workforce: Wyoming is expected to lose 0.6 percent of its employment, compared to business-as-usual — followed by Mississippi (0.5), Iowa (0.4%), Montana (0.3%), Arkansas (0.3%).

Looking across the full economy, California will face the largest loss to statewide GDP ($160 billion). For scale, that’s a loss comparable to the entire GDP of Morocco.[8] Texas ($150 billion), New York ($93 billion), Florida ($81 billion), Georgia ($48 billion) round out the top five “biggest losers” in GDP. As some of the largest economies in the U.S., these five states carry nearly half – 42 percent — of total U.S. GDP loss expected by 2040.

Which States Will Suffer The Worst Air Pollution And Public Health Damage?

Policies that hold back clean energy development in favor of fossil fuels don’t just cost Americans through job losses and rising energy prices. Toxic air and water pollution from burning fossil fuels harms human health, including premature death. Tiny particulate matter (PM 2.5) from burning coal poses a particularly high risk,[9] while exposure to nitrogen oxides (NOx) and sulfur dioxide (SO2) is linked to asthma and other respiratory illnesses.[10]

These have real costs for Americans in terms of wellbeing, livelihoods, and the ability to work – but they also drive up healthcare costs. Nationwide, current federal policies are projected to cost 37,000 additional premature deaths, driven by PM 2.5, SO2, and NOx from extended fossil generation and delayed transition to electric transport. The U.S. faces an additional $72 billion in health care costs, as well as 9.3 billion tons of additional greenhouse gas emissions, which worsen expensive extreme weather events.[11]

Five states will suffer the most additional premature deaths: California (6,500), Texas (6,000), Florida (3,200), Indiana (2,900), Pennsylvania (2,500).

States with a higher rate of coal burning will see proportionately higher deaths per capita, including Indiana (2,900), Ohio (2,000), Kentucky (1,900), Utah (1,500).

State healthcare systems will also incur rising costs due to current policies, with Texas ($11 billion), Indiana ($4.8 billion), California ($4.2 billion), Kentucky ($3.2 billion), Georgia ($3.1 billion) shouldering the highest burden.

Here’s how government officials can protect their constituents from the energy affordability crisis

Smart federal policy is essential to addressing energy affordability. However, state and local leaders can still insulate their constituents from the harms of federal policy shifts and repeals and lower the cost burden on Americans.

EI’s Blueprint for States[12] offers a range of no-regrets near-term actions local and state policy-makers can undertake — including removing barriers to clean energy development, bolstering the transition to electric transportation, stimulating investment in new clean industries, adopting modern energy codes, and supporting technologies that provide clean efficient heat and cooling in buildings and factories.

While these actions can’t replace the pollution reductions and total affordability measures provided by strong federal policy, they can limit price increases, improve health, and add new capacity to the grid.

[1] Lydia DePillis, “Inflation Was Moderate In July, But Energy Prices Remain Elevated,” The New York Times, August 2026, https://www.nytimes.com/live/2026/08/12/business/inflation-cpi-report/.

[2] Olivia Ashmoore, Robbie Orvis, Daniel O’Brien. “Economic, Consumer Cost, Pollution Impacts of Federal Energy Policy Changes In 48 U.S. States,” Energy Innovation, October 2026, https://energyinnovation.org/report/economic-consumer-cost-pollution-impacts-of-federal-energy-policy-changes-in-48-u-s-states/.

[3] Robbie Orvis and Dan O’Brien, “Economic, Consumer Cost, and Pollution Impacts of Federal Energy Policy Changes,” Energy Innovation, July 2026, https://energyinnovation.org/report/economic-consumer-cost-and-pollution-impacts-of-federal-energy-policy-changes/.

[4] Dan Esposito, “What To Know About Final 45V Tax Credit Rules For Electrolytic Hydrogen: A Win For Consumers, Industry, And Climate,” Energy Innovation, January 2025, https://energyinnovation.org/expert-voice/what-to-know-about-final-45v-tax-credit-rules-for-electrolytic-hydrogen-a-win-for-consumers-industry-and-climate/.

[5] Robbie Orvis, Megan Mahajan, and Dan O’Brien, “Final Analysis: Economic Impacts Of U.S. “One Big Beautiful Bill Act” Energy Provisions,” Energy Innovation, July 2025, https://energyinnovation.org/report/updated-economic-impacts-of-u-s-senate-passed-one-big-beautiful-bill-act-energy-provisions/.

[6] Jean Chemnick, “Trump Slashes Biden-Era Economy Standards For Cars,” Politico, September 2024, https://e2.org/releases/report-clean-energy-jobs-grew-3x-faster-than-rest-of-u-s-workforce-in-2024-but-future-growth-now-at-risk/.

[7]  E2, “Report: Clean Energy Jobs Grew 3X Faster Than Rest Of U.S. Workforce In 2024, But Future Growth Now At Risk,” E2, September 2025, https://e2.org/releases/report-clean-energy-jobs-grew-3x-faster-than-rest-of-u-s-workforce-in-2024-but-future-growth-now-at-risk/.

[8] Global Finance Magazine, “Morocco,” Global Finance Magazine, https://gfmag.com/country/morocco-gdp-country-report/.

[9] Lucas Henneman et al., “Mortality Risk From United States Coal Electricity Generation,” Science, November 2023, https://www.science.org/doi/10.1126/science.adf4915/.

[10] World Health Organizations, “Air Quality, Energy And Health,” World Health Organization, https://www.who.int/teams/environment-climate-change-and-health/air-quality-and-health/health-impacts/types-of-pollutants,.

[11] National Centers For Environmental Information, “Billion-Dollar Weather And Climate Disasters,” National Centers For Environmental Information, https://www.ncei.noaa.gov/access/billions/.

[12] Mike O’Boyle, Sara Baldwin, Chris Busch, Michelle Solomon, Brendan Pierpont, Sonali Deshpande, Nik Sawe, and Dan Esposito, “Energy leadership In A Time Of Need: A Blueprint For States,” Energy Innovation, August 2025, https://energyinnovation.org/report/energy-leadership-in-a-time-of-need-a-blueprint-for-states/.

The post What Changes in Federal Energy Policy Mean for Americans appeared first on Energy Innovation.

Modeling shows policy choices are significantly harming America’s economy and increasing energy prices for households and businesses — ranging from electricity prices, to job growth, to vehicle and housing costs, all the way to lost opportunities for green hydrogen production.
The post What Changes in Federal Energy Policy Mean for Americans appeared first on Energy Innovation.[#item_full_content]

An electricity affordability crisis is sweeping across the United States and the situation is particularly acute in California, where electricity rates are the second highest in America — double the U.S. average.[1] Understandably, 83 percent of Californians rank lowering bills as a top or important priority for state leaders to address.[2]

Fixing this crisis won’t be fast or easy, but utility regulators and California’s state officials can tap seven policy solutions to bring much-needed relief to California residents.New analysis, developed by Energy Innovation and GridLab,[3] reveals shows how the governor, state legislator, and utility regulators can curb the three drivers of increasing prices: utility costs (the total size of costs), rates (who pays for the costs), and wildfire (the fastest growing part of costs). Drawing policy insights from a workshop held with over 20 California electricity experts, the new report sets out a path to stabilize electricity rates and ultimately bring down prices.

These policy solutions couldn’t come at a more critical time. Surging electricity costs are threatening California consumers and making the state’s industries less competitive.[4] From a climate policy perspective, California’s high electricity rates threaten to undermine the state’s ambitious clean energy deployment strategy and goals. But, if the state’s leaders can take the right near-term steps, they can reverse the upward cost trend – stabilizing rates, reducing the burden on customers, and making it more affordable for businesses to adopt clean technology.

What’s driving up California’s electricity costs? 

Many factors contribute to California’s rise in electricity costs, but most of the price increases from 2000-2024 are concentrated among the investor-owned utilities (IOUs), which serve about two-thirds of California’s energy customers.[5]

These IOUs are situated within a complex web of factors which ultimately drive up costs for consumers.

Utility spending: Building, expanding, and maintaining distribution, generation and transmission infrastructure[6] — which creates electricity, carries it long distances, and delivers it to homes and businesses — is expensive. Distribution, including investments in advanced meters and smart grid infrastructure, is the largest piece of the bill. The cost to generate power also contributes to customer rates, and increased 40 percent between 2012-2024.[7] And while transmission is the smallest portion of the electricity bill compared to distribution and generation, it has tripled since 2003 (from $1.8 billion up to $5.7 billion in 2023).

Regulation and rules: The state’s rulemaking and regulatory system shapes how and what utilities spend, and ultimately what customers pay. However, current rules don’t reward utilities for keeping costs down, and the state’s mechanisms to track utility costs aren’t built to catch overspending. Additionally, some public programs — like California Alternate Rates for Energy program, energy efficiency and low-income energy efficiency, and early-stage technology deployment — are required by law and funded by customers.

Idle capacity: California’s grid is built for the hottest and highest demand days, but on average days, much of that electricity capacity sits used. This “declining system utilization” drives up rates, because customers still pay to keep a larger-than-needed system ready. 

Wildfires: One large, growing threat driving up costs across the board is wildfire risk.[8] It’s no secret California has battled increasingly devastating wildfires in recent years, given rising temperatures and worsening drought conditions caused by climate change. This creates a major financial challenge for utilities since, under California law, they are strictly liable for property damage due to wildfires caused by their equipment. As a result, utilities have spent significant money to prevent wildfires and compensate victims where they’ve been found liable[9] – these add up to major distribution, transmission, and operations and management costs. Wildfire risk even affects how much utilities pocket when undertaking big capital projects, and the California IOUs’ returns on equity are generally higher than peer utilities due in part to investors’ perceptions of risk around wildfire liability.

Here’s How California’s State Officials Can Lower Electricity Rates

Some of the pressures driving higher electricity rates can’t be relieved immediately. But California’s leaders and government officials have seven clear ways to address regulatory weaknesses, better align incentives, and tackle the question of who pays for what system costs.

The first order of business is putting the tools and structures in place to improve regulatory oversight of utility spending and encourage utilities to lower costs – in other words, “putting utilities on a budget.”

How government officials can increase oversight and cut total utility costs:

Reduce regulatory overhead, such as simplifying regulatory processing and improving the permitting process to reduce costs

Confront distrust and improve oversight and transparency by creating standard reporting templates for cost tracking

Align utility incentives with affordability by putting IOUs on a budget, limiting excess utility profits, and tying financial performance to cost-savings goals

The second priority is ensuring utility rates allocate costs and risks more fairly between customers and utilities.

How government officials can fairly allocate system cuts:

Modernize rate design to prioritize improved utilization and equity and prevent electric vehicle and heat-pump electrification savings from being negated by rising rates

Reduce the role of rates in funding climate mitigation and wildfire prevention by rebalancing costs toward beneficiaries, including utility shareholders and California taxpayers, and build a coordinated framework across agencies and utilities for smarter wildfire mitigation spending

Lower utility financing costs and risk passed to consumers by changing utilities’ debt-to-equity ratio and leveraging lower-cost capital and public financing

Encourage customer flexibility and improve grid efficiency by combining state electrification incentives[10] with rate design and by leveraging flexible large loads to improve electricity system utilization

There’s no silver bullet to cut electricity prices right away, but we can stop the seemingly never-ending rise in rate hikes. California’s incoming governor, the California Public Utilities Commission, and state legislature have a range of solutions at their disposal.[11]  

If those in power take swift action and enact these changes, they could begin reversing skyrocketing utility cost increases, help lift the burden of heavy electricity bills from California’s customers, and give the state a chance to lead as demand continues to grow.

[1] U.S. Energy Information Administration, “Electricity Monthly Update,” U.S. Energy Information Administration, 2026, https://www.eia.gov/electricity/monthly/update/.

[2] Deploy Action, “New Polling: California Voters Want Decisive Action To Bring Electricity Costs Down,” Deploy Action, 2026, https://www.deploy-action.org/newsroom/new-polling-california-voters-want-decisive-action-to-bring-electricity-costs-down?utm_source=linkedin&utm_medium=social&utm_campaign=california&utm_content=phil/.

[3] Mike O’Boyle, Ric O’Connell, Et al., “Making California’s Electricity Cheaper: An Affordability Agenda For The Golden State,” Energy Innovation, 2026, https://energyinnovation.org/report/making-californias-electricity-cheaper-an-affordability-agenda-for-the-golden-state/.

[4] Shannon Stirone, “Fixing California’s Electricity Prices: Q&A With GridLab’s Ric O’Connell,” Substack, 2026, https://thepowerline.substack.com/p/fixing-californias-electricity-prices/.

[5] Energy Innovation, “U.S. Electricity Bills Are Rising Fast: Which States Are Paying More – And Why,” Energy Innovation, 2026, https://energyinnovation.org/expert-voice/u-s-electricity-bills-are-rising-fast-which-states-are-paying-more-and-why/.

[6] Michelle Solomon, “What Is Surplus Interconnection? And Why It Could Unlock The U.S. Power Grid,” Energy Innovation, 2026, https://energyinnovation.org/expert-voice/what-is-surplus-interconnection-and-why-it-could-unlock-the-u-s-power-grid/.

[7] Mike O’Boyle, Ric O’Connell, Et al., “Making California’s Electricity Cheaper: An Affordability Agenda For The Golden State,” Energy Innovation, 2026, https://energyinnovation.org/report/making-californias-electricity-cheaper-an-affordability-agenda-for-the-golden-state/.

[8] Chris Franklin, “Wildfire Risk In California Could Lead To Power Outages For Thousands of Residents,” Yahoo! News, 2026, https://www.yahoo.com/news/weather-news/articles/wildfire-risk-california-could-lead-215754528.html/.

[9] Cheri Mossburg, “California’s Utility Giant P&E Pays $55 Million Settlement Over Kincaide And Dixie Wildfires,” CNN, 2026, https://www.cnn.com/2022/04/11/us/california-pacific-gas-and-electric-settlement/.

[10] Brendan Pierpont, Matthias Fripp and Michelle Solomon, “Let The Sun In: Clean Energy Is The Cheapest Way To Meet Rising Demand,” Energy Innovation, 2026, https://energyinnovation.org/report/let-the-sun-in-clean-energy-is-the-cheapest-way-to-meet-rising-demand/.

[11] Mike O’Boyle, Brendan Pierpont and Michelle Solomon, “Energy Leadership In A Time Of Need: Remove Barriers To Clean Energy,” Energy Innovation, 2025, https://energyinnovation.org/report/energy-leadership-in-a-time-of-need-remove-barriers-to-clean-energy/.

The post California’s Electricity Affordability Crisis Harms Consumers: Here’s How To Solve It appeared first on Energy Innovation.

Utility costs, wildfire liability, and outdated rate design are increasing California’s electricity bills. State officials have seven ways to stabilize rates then cut costs.
The post California’s Electricity Affordability Crisis Harms Consumers: Here’s How To Solve It appeared first on Energy Innovation.[#item_full_content]

Utilities are facing an unprecedented volume of requests for new data center interconnections as AI demand skyrockets—and many are reverting with outdated plans to build large, centralized fossil fuel power plants even though cleaner and cheaper options are available.

A growing body of research shows the fastest, cheapest, and most reliable way to power the AI era isn’t more fossil fuels that cost customers and the climate. It’s flexibility, storage, and clean generation brought directly by the customers driving the demand, increasingly known as Bring Your Own Power (BYOP).[1]

How to “BYOP”

If managed effectively, data centers can help cut rising consumer electricity costs. To start, these power-guzzling facilities should bring their own clean energy assets to the system—enabling new large loads to become assets rather than burdens on the grid.

Utility rate design and smart policy should encourage BYOP.

Rate structures like a Clean Transition Tariff[2] or on-site clean energy parks[3] incentivize data center customers to bring their own new clean generation. Meanwhile, thoughtful policy could expedite interconnection[4] for data centers that meet the right conditions, further encouraging those large consumers to position themselves as grid assets. This can include projects that commit to participate in a demand flexibility program, projects sited where the grid already has spare capacity, and projects co-located with solar-plus-storage or other clean resources.

The cost of powering data centers with fossil fuels

Faced with rapid new demand not seen in decades, many utilities and developers have fallen back on old habits—adding gas plants, refurbishing aging and uneconomic coal units, or striking nuclear partnerships alongside massive grid upgrades. This “firm fixation”[5] is an outdated belief that only always-on, firm resources and major transmission builds are best-suited to serve data centers.

In reality, meeting America’s data center-driven demand growth with a fossil-fuel-heavy strategy would add an estimated $29.7 billion annually to customer bills by 2030, according to a recent Energy Innovation analysis.[6] A clean energy approach, by contrast, would reduce the overall cost of meeting that load growth by $5.1 billion a year in 2030 compared to the high-fossil path, saving consumers 17 percent over that period.

The cost risk worsens when accounting for fuel price volatility. A spike in coal and gas prices like the one the U.S. experienced in 2022—a plausible scenario, given increasingly unpredictable extreme weather and geopolitical instability—would add $40.5 billion a year[7] in costs under a fossil-heavy scenario. Clean energy[8] would curtail that burden by $8.4 billion,[9] for total savings of $13.5 billion a year relative to staying reliant on fossil fuels.

Myopically focusing on firm power also overlooks two critical ideas. First, generation and demand are part of one interconnected system, not two separate problems. Second, data center load is dynamic and would benefit tremendously from modular flexible approaches[10] suited to today’s grid.

That matters most at the point of interconnection, which is the moment of maximum leverage for government officials to ensure new entrants cover the costs they trigger. This is a critical period to steer large loads like data centers toward flexible demand and local storage that ease bottlenecks, and to align tariffs with actual cost causation and reward flexibility.

Bring your own flexibility (BYOF) can complement BYOP

Flexibility can be a grid resource in and of itself. Innovative rate design can allocate costs to data center customers in proportion to what those customers create for the system, ensuring flexibility commitments earn lower rates or reduced upfront costs in return.

Flexibility can look like data centers participating in demand flexibility programs, shifting computing workloads, trimming operations, or leaning on (clean) backup power and on-site storage during stressed grid hours. Utilities that actively manage data center demand this way can meet load growth while avoiding new gas plants or grid upgrades altogether which benefits these facilities by speeding up their grid connection.

Flexibility’s potential impact is significant. Duke University’s Nicholas Institute found that the grid could absorb roughly 100 gigawatts of new data center load[11] nationwide without any new peak generation if those data centers curtail just 0.5 percent of their annual electricity use during peak-demand hours.

Energy parks can build economic hubs through BYOP

Energy parks are another great example[12] of the BYOP model. As wind, solar, and battery storage costs continue to fall, they’re attracting large retail and wholesale customers willing to take on more of the cost and responsibility that utilities traditionally carried in exchange for faster, cheaper access to clean power.

Energy Parks Graphic

For large consumers, energy parks offer bespoke solutions and remove real barriers to getting the low-cost, clean electricity they need while creating economic hubs that generate community benefits without generating local air pollution.

Energy parks can bundle multiple clean energy sources and co-locate them with the consumer, such as a factory or data center, all tied to the grid through a single point of interconnection. That single-point design speeds development and spreads infrastructure costs, while directly connecting complementary resources. If set up in this way, data centers could send unused power back to the grid when it’s needed or continue to power themselves when the grid is plentiful.

They’re also modular, meaning storage, load, and generation can all be added behind the same point of interconnection as needs evolve. That modularity delivers several benefits: sharing a single high-voltage transformer can meaningfully cut equipment costs; combining supply- and demand-side projects can make it easier to capture tax credits, green certificates, and local economic development incentives; and the arrangement can evolve as market conditions and project needs change.

The data center boom doesn’t have to mean dirty air and expensive bills

The data center boom doesn’t have to mean a return to fossil fuels. In fact, such an approach risks saddling customers with billions of dollars in unnecessary costs per year.

Data centers that bring their own clean generation, commit to flexibility, and co-locate with storage aren’t just easier on the grid—they’re cheaper, faster to interconnect, and more resilient to fuel price shocks. In other words, bringing their own power is a deal that benefits both sides of the equation.

The choice utilities and regulators make in the next few years—whether to lean into flexibility, storage, and clean generation, or fall back on the “firm fixation”—will shape electricity costs for everyone. The solutions to get this right already exist. What’s needed now is the rate design and policies to put them to work.

[1] George Sakellaris, “Why Data Centers Will Need A ‘Bring Your Own Power’ Strategy,” UtilityDive, 2026, https://www.utilitydive.com/news/why-data-centers-will-need-a-byop-strategy-bring-your-own-power/812004/.

[2] Brendan Pierpont, Matthias Fripps, and Michelle Solomon, “Let The Sun In: Clean Energy Is The Cheapest Way To Meet Rising Demand,” Energy Innovation, 2026, https://energyinnovation.org/report/let-the-sun-in-clean-energy-is-the-cheapest-way-to-meet-rising-demand/.

[3] Eric Gimon, Mark Ahlstrom, and Mike O’Boyle, “Energy Parks: A New Strategy To Meet Rising Electricity Demand,” Energy Innovation, 2024, https://energyinnovation.org/report/energy-parks-a-new-strategy-to-meet-rising-electricity-demand/.

[4] Brendan Pierpont, “Data Center Demand Flexibility,” Energy Innovation, 2025, https://energyinnovation.org/report/data-center-demand-flexibility/.

[5] Eric Gimon, “Dodging The Firm Fixation For Data Centers And The Grid,” Energy Innovation, 2025, https://energyinnovation.org/report/dodging-the-firm-fixation-for-data-centers-and-the-grid/.

[6] Brendan Pierpont, Matthias Fripps, and Michelle Solomon, “Let The Sun In: Clean Energy Is The Cheapest Way To Meet Rising Demand,” Energy Innovation, 2026, https://energyinnovation.org/report/let-the-sun-in-clean-energy-is-the-cheapest-way-to-meet-rising-demand/.

[7] Brendan Pierpont, Matthias Fripps, and Michelle Solomon, “Let The Sun In: Clean Energy Is The Cheapest Way To Meet Rising Demand,” Energy Innovation, 2026, https://energyinnovation.org/report/let-the-sun-in-clean-energy-is-the-cheapest-way-to-meet-rising-demand/.

[8] Energy Innovation, “Video: How Clean Energy Helps Grid Reliability,” Energy Innovation, 2026, https://energyinnovation.org/multimedia/video-how-clean-energy-helps-grid-reliability/.

[9] Brendan Pierpont, Matthias Fripps, and Michelle Solomon, “Let The Sun In: Clean Energy Is The Cheapest Way To Meet Rising Demand,” Energy Innovation, 2026, https://energyinnovation.org/report/let-the-sun-in-clean-energy-is-the-cheapest-way-to-meet-rising-demand/.

[10] Lydia Brown, “What Is An Energy Park?,” Energy Innovation, 2026, https://energyinnovation.org/expert-voice/what-is-an-energy-park/.

[11] Jason Plautz, “Study Finds Headroom On The Grid For Data Centers,” E&E News, 2025, https://www.eenews.net/articles/study-finds-headroom-on-the-grid-for-data-centers/.

[12] Eric Gimon, Mark Ahlstrom, and Mike O’Boyle, “Energy Parks: A New Strategy To Meet Rising Electricity Demand,” Energy Innovation, 2024, https://energyinnovation.org/report/energy-parks-a-new-strategy-to-meet-rising-electricity-demand/.

The post Bring Your Own Power: How Data Centers Can Solve Their Own Energy Problem appeared first on Energy Innovation.

A growing body of research shows the fastest, cheapest, and most reliable way to power the AI era isn’t more fossil fuels that cost customers and the climate. It’s flexibility, storage, and clean generation brought directly by the customers driving the demand, increasingly known as Bring Your Own Power (BYOP).
The post Bring Your Own Power: How Data Centers Can Solve Their Own Energy Problem appeared first on Energy Innovation.[#item_full_content]

America’s natural gas prices are rising, sending household energy costs spiking along with them. From 2024 to 2025 alone, gas prices rose 63 percent.[1] By 2027, they could jump another 30 percent as demand grows and the United States increases exports of domestic fuel to other countries.

Rising gas prices[2] are directly increasing consumer electricity bills: Power plants that burn natural gas to generate electricity make up roughly 40 percent of the U.S. electricity mix, but those power plants almost always set overall power prices. That’s in part because in wholesale electricity markets, where utilities buy power that gets resold to households and businesses, the amount it costs to run a gas plant often dictates how the price of electricity is set across the rest of the market. Utilities are also allowed to pass 100 percent of the cost of fuel to customers.

Put simply, when natural gas prices spike, the cost that consumers pay for power rises.

What is driving high gas prices today?

High natural gas prices are created by many factors including global conflicts, increasing domestic exports, extreme weather caused by climate change, and rising infrastructure and operating costs. At a high level, gas is a commodity that is easily impacted by volatile international markets—and in recent years, global conflicts have been particularly harmful to the market price for gas.

Global conflicts create fossil fuel volatility

Russia’s invasion of Ukraine in 2022 sparked an energy crisis across Europe as countries quickly tried to free themselves from their dependence on Russian gas. The resulting energy crunch sent reverberations across the globe. U.S. liquefied natural gas companies scrambled to fill the gap left by Russia by shipping fuel produced in the U.S. to other countries, tightening domestic supplies and sending natural gas and electricity prices soaring.[3]

The war in Iran has further exacerbated constrained supplies. The conflict shut down the Strait of Hormuz, which moves roughly 20 percent of the world’s oil and gas supplies.[4] But that’s not the end of the story. Many Middle Eastern processing and export facilities have been damaged and will require extensive repairs once hostilities end, and the war’s wider effects on oil prices may increase demand for natural gas,[5] further increasing upward pressure on prices.

Increased U.S. gas exports will push up consumer prices

Conflicts across the world have also led to a more aggressive push from U.S. gas exporters to increase the supply of fuel they can ship to foreign nations. The U.S. is already the largest exporter of natural gas––in 2025 alone, the nation exported roughly enough to heat 134 million American households. That export capacity and U.S. exposure to global price volatility has been limited because our LNG terminals are maxed out, but their export capacity is projected to nearly double[6] by the end of the decade, foreshadowing an era where the U.S. exports more gas than its citizens consume – and where prices rise domestically as well as internationally.

This level of exports increases consumer prices because as U.S. LNG companies increasingly tie themselves to the global markets, domestic consumers become less insulated[7] from international price shocks. A 2024 Department of Energy study[8] found that natural gas prices are expected to rise 31 percent by 2050 as exports continue to rise.

Extreme weather drives extreme consumer gas costs

Extreme weather can also drive huge swings in natural gas prices, due to a combination of poor weatherization, equipment failure, and increased demand. Winter Storm Uri in Texas sent spot natural gas prices rising ten-fold[9] after heating demand skyrocketed and gas equipment across the state failed. But it wasn’t just Texas that felt the shocks: Oklahoma customers were saddled with $4.5 billion in costs[10] following the storm, thanks to a week of high fuel prices that they’ll be paying for the next 25 years.

Smaller, relatively less destructive winter storms have taken their toll on the gas system as well. A period of cold weather at the start of 2026 sent spot market prices rising 40 percent month over month.[11] In Colorado, the state’s utility Xcel Energy warned that consumers would see bills rise because of tight gas supplies during this year’s winter storm, costing consumers up to a dollar per month extra for the rest of the year[12] due to the storm’s impacts alone. In fact, over the last four years, successive winter storms have caused major disruptions to natural gas production,[13] putting further pressure on prices.

Gas infrastructure, operating costs have risen

The cost of gas as a source of electricity has risen significantly in recent years because of growing infrastructure[14] and operational costs associated with building and running the gas plants themselves. The system that powers gas power plants is complex and expensive, requiring an extensive pipeline and distribution network alongside necessary grid infrastructure.

That means that even when commodity prices for natural gas drop slightly, high infrastructure costs could still keep prices high. As of February 2026, gas sent to utilities via pipelines jumped approximately 11 percent[15] compared to last year, while natural gas commodity prices remained slightly lower—suggesting the cost increase was driven by equipment costs, not the price of fuel.

Building the power plants themselves represents an enormous cost, particularly amid a growing backlog for gas turbine equipment. John Ketchum, the CEO of utility giant NextEra Energy, said that the cost for building new gas-fired plants has more than tripled,[16] jumping from $785 per kilowatt in 2022 for some facilities, to $2,400 three years later. And GridLab analysis reveals[17] upstream gas infrastructure costs add 30 percent or more to the cost of a gas power plant but are rarely included in the regulatory process to approve plants. GridLab also estimates[18] combined cycle gas turbine costs have increased from between $1,000 and $1,400 per kilowatt for projects nearly completion to over $2,000 a kW for recently commenced projects.

Running large, complex gas systems also comes with high costs[19] including fuel, personnel, and maintenance requirements. Resources like wind, solar, and battery storage, meanwhile, avoid those costs because they don’t require fuel to run and are essentially free to operate once built.

Where are high gas prices showing up in electricity bills?

Electricity consumers across the country are already seeing the consequences of high natural gas prices on their power bills.[20]

Last year, regional power grids that rely heavily on natural gas saw some of their electricity price spikes[21] closely tied to natural gas prices. Overall, the increase in gas prices drove year-over-year electricity price increases across 21 states, particularly those within those gas-heavy regions.

The New England Independent System Operator, for instance, which generates more than half its power from gas, saw prices rise 2.9 cents per kilowatt-hour, while New York, the PJM Interconnection—a region that covers Chicago to the Mid-Atlantic, and the Midcontinent Independent System Operator—which stretches from North Dakota to Louisiana—all saw prices jump as well.[22]

Without a significant shift away from natural gas dependency, consumers across the country will continue to pay the price for dependence on volatile global markets, aging infrastructure, and increasingly extreme weather—costs that advanced solutions like wind, solar, and battery storage could help avoid.

[i] Brendan Pierpont, “Why Are Natural Gas Prices So High?”, Substack, 2026, https://thepowerline.substack.com/p/why-are-natural-gas-prices-so-high.

[2] Edward Burgess, Maria Roumpani, Laura Burford,  Jordan Ahern, Alexandria Herr, and Erik Olson, “Beyond The Power Plant: The Hidden Costs Of Gas-Fired Generation,” GridLab, 2026, https://gridlab.org/hidden-cost-of-gas/.

[3] Brendan Pierpont, “Clean Energy Isn’t Driving Power Price Spikes,” Energy Innovation, 2024, https://energyinnovation.org/report/clean-energy-isnt-driving-power-price-spikes/.

[4] Alex Lawler and Arathy Somasekhar, “Iran War’s Energy Impact Forces World To Pay Up, Cut Consumption,” Reuters, 2026, https://www.reuters.com/business/energy/iran-wars-energy-impact-forces-world-pay-up-cut-consumption-2026-03-21/.

[5] Brendan Pierpont, “Why Are Natural Gas Prices So High?”, Substack, 2026, https://thepowerline.substack.com/p/why-are-natural-gas-prices-so-high.

[6] U.S. Energy Information Administration, “North America’s LNG Export Capacity Could More Than Double By 2029,” U.S. Energy Information Administration, 2025, https://www.eia.gov/todayinenergy/detail.php?id=66384.

[7] New York Independent System Operator, “Electricity Prices In New York,” New York Independent System Operator, 2026, https://www.nyiso.com/documents/d/guest/costs-behind-rising-electricity-prices-whitepaper/.

[8] U.S. Department of Energy, “Appendix B: Domestic Energy, Economic, And GHG Assessment Of U.S. LNG Exports,” U.S. Department of Energy, 2024, https://www.energy.gov/sites/default/files/2024-12/LNGUpdate_AppendixB_Dec2024.pdf.

[9] Dan Esposito and Eric Gimon, “The Texas Big Freeze: How A Changing Climate Pushed The State’s Power Grid To The Brink,” Utility Dive, 2021, https://www.utilitydive.com/news/the-texas-big-freeze-how-a-changing-climate-pushed-the-states-power-grid/601098/.

[10] Mike W. Ray, “2021 Winter Storm Uri Bonds Total Approximately $4.5B,” Southwest Ledger, 2024, https://www.southwestledger.news/news/2021-winter-storm-uri-bonds-total-approximately-45b-0.

[11] U.S. Energy Information Administration, “EIA Raises Natural Gas Price Forecast Following Increased Heating Demand Amid Severe Winter Weather,” U.S. Energy Information Administration, 2026, https://www.eia.gov/pressroom/releases/press583.php.

[12] Michael Booth, “Your Xcel Energy Bill Is Already Going Up Amid Colorado’s Current Winter Storm. Here’s Why.,” The Colorado Sun, 2026, https://coloradosun.com/2026/01/23/xcel-colorado-storm-price-increase-natural-gas/.

[13] U.S. Energy Information Administration, “Winter Storms Have Disrupted U.S. Natural Gas Production,” U.S. Energy Information Administration, 2024, https://www.eia.gov/todayinenergy/detail.php?id=61563.

[14] Edward Burgess, Maria Roumpani, Laura Burford,  Jordan Ahern, Alexandria Herr, and Erik Olson, “Beyond The Power Plant: The Hidden Costs Of Gas-Fired Generation,” GridLab, 2026, https://gridlab.org/hidden-cost-of-gas/.

[15] U.S. Bureau of Labor Statistics, “Archived Consumer Price Index Supplemental Files,” U.S. Bureau of Labor Statistics, 2026, https://www.bls.gov/cpi/tables/supplemental-files/home.htm.

[16] Georgina Mccartney, “NextEra Energy Expects 55% Jump In Global Power Demand Over The Next 20 Years, CEO Says,” Reuters, 2025, https://www.reuters.com/business/energy/ceraweek-nextera-energy-expects-55-jump-global-power-demand-over-next-20-years-2025-03-10/.

[17] Edward Burgess, Maria Roumpani, Laura Burford,  Jordan Ahern, Alexandria Herr, and Erik Olson, “Beyond The Power Plant: The Hidden Costs Of Gas-Fired Generation,” GridLab, 2026, https://gridlab.org/hidden-cost-of-gas/.

[18] GridLab, “The New Reality Of Power Generation: An Analysis Of Increasing Gas Turbine Costs In The U.S.,” GridLab, 2025, https://gridlab.org/portfolio-item/gas-tubine-cost-report/.

[19] Brendan Pierpont, “Why Are Natural Gas Prices So High?”, Substack, 2026, https://thepowerline.substack.com/p/why-are-natural-gas-prices-so-high.

[20] Energy Innovation,“U.S. Electricity Bills Are Rising Fast: Which States Are Paying More – And Why,” Energy Innovation, 2026, https://energyinnovation.org/expert-voice/u-s-electricity-bills-are-rising-fast-which-states-are-paying-more-and-why/.

[21] Ryan H. Wiser, Galen L Barbose, Will Gorman, Eric O’Shaughnessy, Sydney Forrester, Paul Donohoo-Vallett, Peter Cappers, Jeff Deason, Ryan Hledik, and Long Lam, “Retail Electricity Price Trends And Drivers: Data Update−2026 Edition,” Lawrence Berkeley Lab Energy Markets and Planning, 2026, https://emp.lbl.gov/publications/retail-electricity-price-trends-and/.

[xxii] Ryan H. Wiser, Galen L Barbose, Will Gorman, Eric O’Shaughnessy, Sydney Forrester, Paul Donohoo-Vallett, Peter Cappers, Jeff Deason, Ryan Hledik, and Long Lam, “Retail Electricity Price Trends And Drivers: Data Update−2026 Edition,” Lawrence Berkeley Lab Energy Markets and Planning, 2026, https://emp.lbl.gov/publications/retail-electricity-price-trends-and/.

The post Why Are Natural Gas Prices So High? appeared first on Energy Innovation.

America’s natural gas prices are rising, sending household energy costs spiking along with them. Projections estimate that by 2027, they could jump another 30 percent as demand grows and the United States increases exports of domestic fuel to other countries.
The post Why Are Natural Gas Prices So High? appeared first on Energy Innovation.[#item_full_content]