EIA expects higher wholesale electricity prices in the U.S. by 2025

The U.S. Energy Information Administration forecasts higher wholesale electricity prices in 2025 for all regions of the United States, except Texas and Northwest.

In a report released on Monday, the EIA stated that wholesale power prices may average $40 per Megawatt Hour (MWh) in 2019. This would represent 7% more than 2024. The EIA predicted that the average cost of electricity in U.S. households would rise by 2% without accounting for inflation.

Southwest and California are expected to see the biggest increases in wholesale prices with an increase of 30% to 35%.

Why it Matters

Power bills will increase as power demand increases from AI data centres, domestic manufacturing, and electrification in industries such as transportation.

Wholesale power prices are partly determined by the operating costs of power generators, the cost to fuel power plants and the amount of traffic on transmission lines.

EIA says that the cost of natural gases, which are the most important fuels for U.S. electricity generation, will average $3.37 for every million British thermal units delivered this year. This is a 24% increase from last year but is roughly the same in 2023.

OUTLIERS

EIA predicts that wholesale electricity prices in Texas will range between $30/MWh on the ERCOT Market and $55/MWh for the portion of the state managed by Southwest Power Pool. The EIA stated that Texas, where solar power has been booming, will be the only market to experience lower power prices in comparison to last year.

The EIA stated that in the U.S. Northwest a 20% increase in hydropower production is expected due to the increased rainfall expected in the region. This will help grow the power supply in the area and prevent prices from increasing.

(source: Reuters)