New Berkeley Lab report summarizes trends in retail electricity prices and price drivers
We are pleased to announce the release of a new Berkeley Lab report, Retail Electricity Price and Cost Trends: 2024 Update, summarizing recent trends in retail electricity price levels and price drivers in the United States. National, regional, and state trends are reported for 2019 through 2023 using publicly-available data for: Average retail electricity prices, retail sales, and utility revenues; utility capital expenditures, operations and maintenance costs, and fuel and purchased power costs; and retail electricity sales impacts from behind-the-meter resources. The report also includes qualitative case studies highlighting recent and/or regionally-specific issues contributing significantly to retail electricity price trends.
The report, published in slide-deck format, is intended to serve as a reference document for the diverse set of decision-makers impacted by changes in retail electricity prices and to provide a factual basis for assessing recent changes in retail electricity prices and key underlying drivers. The authors will host a webinar summarizing the key findings from the report on January 28, at 10:00 am PT/1:00 pm ET. Please register for the free webinar here: https://lbnl.zoom.us/webinar/register/WN_HJ58JeSTTICwTORgQW3vIA.
The following are a few key findings from the report.
Retail electricity prices increased from 2019 to 2023. On a nominal basis, U.S. average retail electricity prices increased 2.5% per year over the decade from 2014 to 2023 (see left panel of Figure 1), though the majority of this change took place over our study period (from 2019-2023, rates rose 4.8% annually). Taking inflation into account, U.S. average retail electricity prices were mostly flat between 2019 and 2023, though have been rising faster than inflation for residential customers. Since 2019, collected revenues increased by more than 20%, whereas retail sales remained fairly flat, indicating that recent increases in retail electricity prices have been driven principally by rising revenues (costs) (see right panel of Figure 1).
Figure 1. The left panel shows U.S. Average Retail Electricity Prices from 2014 to 2023 and the right panel shows U.S. Collected Revenue, Retail Sales, and Electricity Prices from 2019 to 2023
Distribution system costs grew the most among utility costs. Distribution capital expenditures (CapEx) has grown steadily and at a rapid clip—growing by 50% over 2019-2023, more than double the rate of inflation (see Figure 2). Distribution is currently the largest source of utility CapEx (44% of the total in 2023). Similarly, distribution operations and maintenance (O&M) costs have grown the most since 2019, especially in the West. Utility fuel and purchase power (FPP) costs have risen and fallen with natural gas prices, which comprise roughly 40% of the U.S. electric generation mix. While natural gas prices in 2023 returned to 2019 levels, FPP costs remain elevated at roughly 30% above 2019 levels.
Figure 2. Growth in Utility Capital Expenditures from 2019 to 2023
Load growth was not a major driver in cost-growth at the national level. Retail electricity sales remained nearly flat from 2019 to 2023 and was not a major driver of cost-growth in recent years at the national level, though some states and utilities experienced significant load growth due to new data centers and industrial facilities. There was also considerable fluctuation in year-over-year growth, depending on the customer class. Commercial and industrial (C&I) sales fell sharply from 2019-2020 with the onset of the COVID-19 pandemic, rebounding the following year. Residential sales dropped markedly from 2022-23, partly due to milder weather, while C&I sales remained flat.
Customer investments in behind-the-meter (BTM) resources grew. BTM resources, including energy efficiency, distributed solar PV, electric heat pumps, and electric vehicles, grew from 2019 to 2023. On an absolute basis, energy efficiency load impacts grew the most by roughly 250,000 GWh from 2019 to 2023, inclusive of utility ratepayer-funded energy efficiency programs and federal appliance standards. On a percentage basis, electric vehicle load impacts grew the most at more than 400% from 2021 to 2023. BTM resources can either increase or decrease utility retail sales and costs depending on the specific BTM resource (e.g., energy efficiency can dampen load growth and electric vehicles can accelerate load growth) and where on the grid they are deployed.
We thank the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy for their support of this work.