U.S. consumers are expected to save money on their electricity bills under the nation’s first comprehensive climate law—perhaps more than $200 billion over the next decade, economists project. Even utilities are talking about eased prices at the same time they are detailing new clean energy investments.
The finding that so many U.S. customers are paying inflated electricity rates “is an incredibly important insight,” Stock said. “What it says is, ‘Gosh, electricity prices should be lower.’ With lower prices, you can say, ‘Maybe heat pumps will be better and maybe EVs will be better, and maybe we really can do this electrify-everything deal.’”
In separate research, Borenstein and Ryan Kellogg, professor at the University of Chicago’s Harris School of Public Policy, found that government incentives—essentially, an approach like that adopted by Congress and the Biden administration—make a great deal of economic sense, given the current U.S. landscape of electricity prices. They found that clean technology incentives can spur emissions reductions in the sector (through retirement of coal plants, for example) just as quickly as a carbon tax would. And of the three big policy options they looked at (including a national clean electricity standard, originally part of the Biden plan, which they found also would be effective in cutting emissions), Kellogg and Borenstein found that electricity prices would be lowest under an incentives approach.
Under an incentives-driven climate policy, government spending is higher than it would be under carbon pricing or a clean electricity standard, the analysis showed. But the researchers said that spending needs to be considered in the context of the realities climate policymakers are facing, including the premium residents currently are paying on their electricity bills.
“That spending is offsetting, in some sense, the electricity ‘tax,’ the per-kilowatt-hour electricity tax that we’re all paying, that’s going to be really inefficient in a world where the grid is green,” Kellogg said.