Rising Electricity Costs: What Businesses Need to Know
Rising electricity costs are creating new challenges for businesses across the country. Industrial electricity prices have been climbing steadily, and this trend shows no sign of slowing down. Since 2014, U.S. electricity price increases have totaled roughly 22.7%, and by 2030, electricity price projections point to another 27% rise, with annual hikes averaging 4.7%–5.2%.
The long-term data tells a similar story. According to the U.S. Energy Information Administration (EIA), the average cost of electricity per kWh has increased 2.85% per year over the past 25 years. In 1999, the national average price was just 8.17 cents/kWh, compared to 16.48 cents/kWh today. Looking back even further, since 1960 the annual rate of increase has averaged 2.93%.
These persistent electricity cost trends highlight how deeply rising energy expenses affect industrial energy costs, making it clear that businesses need to prepare for continued upward pressure on cost.
What’s Driving Further Increases
Growing Demand from AI, Data Centers, and Manufacturing
A recent Grid Strategies analysis found that U.S. electricity demand growth could surge by 128 GW over the next five years—a 456% increase compared to earlier forecasts. Much of this growth stems from AI data centers, electrified transportation, and reshoring of manufacturing.
This wave of demand highlights the urgency for utilities to balance modernization, reliability, and decarbonization while facing cost pressures that feed directly into electricity costs for businesses.
Grid Overhaul and Infrastructure Costs
The U.S. grid is undergoing a massive remake to handle surging AI-driven demand and renewable integration. These infrastructure upgrades are a major driver behind rising industrial energy costs, and the expenses inevitably flow through to ratepayers in the form of higher bills.
Inflation, Fuel Costs, and Price Pressure
Energy price inflation and rising natural gas costs continue to push electricity prices upward. The EIA’s Short-Term Energy Outlook shows how competition between coal, renewables, and gas influences U.S. electricity price increases depending on policy and market conditions.
Long-Term Demand Growth
The CSIS Strategic Perspectives report points to electrification, climate policy, and digital infrastructure as structural forces that will sustain higher demand growth for decades, particularly in industrial and commercial sectors—creating ongoing upward pressure on electricity cost trends.
What Businesses Can Do
While businesses can’t control market conditions, there are ways to manage exposure:
- Invest in on-site renewables - Solar plus storage can reduce reliance on utility rates and lock in long-term savings.
- Boost efficiency - Demand management systems, retrofits, and LED upgrades can reduce consumption and mitigate industrial energy costs.
- Monitor incentives - Federal and state programs offer tax credits that help offset electricity costs for businesses adopting renewable energy.
- Plan long term - Companies should stress-test energy budgets using historical averages (2.85%–2.93% annual increases) alongside more recent electricity price projections for 2030.
Bottom Line
Electricity costs are on an undeniable upward trajectory, driven by surging demand, grid investments, fuel price volatility, and policy-driven shifts. For businesses, that means the cost of inaction will only rise, but those who invest in resilience and efficiency today will gain a competitive edge tomorrow.
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