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Look more closely at today’s inflation figures and you’ll see it.
Inflation is slowing, but electricity bills are rising. While the below-expectations inflation figure reported by the Bureau of Labor Statistics Wednesday morning — the consumer price index rose by just 0.1% in May, and 2.4% on the year — has been eagerly claimed by the Trump administration as a victory over inflation, a looming increase in electricity costs could complicate that story.
Consumer electricity prices rose 0.9% in May, and are up 4.5% in the past year. And it’s quite likely price increases will accelerate through the summer, thanks to America’s largest electricity market, PJM Interconnection. Significant hikes are expected or are already happening in many PJM states, including Maryland, New Jersey, Delaware, Pennsylvania, and Ohio with some utilities having said they would raise rates as soon as this month.
This has led to scrambling by state governments, with New Jersey announcing hundreds of millions of dollars of relief to alleviate rate increases as high as 20%. Maryland convinced one utility to spread out the increase over a few months.
While the dysfunctions of PJM are distinct and well known — new capacity additions have not matched fossil fuel retirements, leading to skyrocketing payments for those generators that can promise to be on in time of need — the overall supply and demand dynamics of the electricity industry could lead to a broader price squeeze.
“Trump and JD Vance can get off tweets about how there’s no inflation, but I don’t think they’ll feel that way in a week or two,” Skanda Amarnath, executive director of Employ America, told me.
And while the consumer price index is made up of, well, almost everything people buy, electricity price increases can have a broad effect on prices in general. “Everyone relies on energy,” Amarnath said. “Businesses that have higher costs can’t just eat it.” That means higher electricity prices may be translated into higher costs throughout the economy, a phenomenon known as “cost-push inflation.”
Aside from the particular dynamics of any one electricity market, there’s likely to be pressure on electricity prices across the country from the increased demand for energy from computing and factories. “There’s a big supply adjustment that’s going to have to happen, the data center demand dynamic is coming to roost,” Amarnath said.
Jefferies Chief U.S. Economist Thomas Simons said as much in a note to clients Wednesday. “Increased stress on the electrical grid from AI data centers, electric vehicle charging, and obligations to fund infrastructure and greenification projects have forced utilities to increase prices,” he wrote.
Of course, there’s also great uncertainty about the future path of electricity policy — namely, what happens to the Inflation Reduction Act — and what that means for prices.
The research group Energy Innovation has modeled the House reconciliation bill’s impact on the economy and the energy industry. The report finds that the bill “would dramatically slow deployment of new electricity generating capacity at a time of rapidly growing electricity demand.” That would result in higher electricity and energy prices across the board, with increases in household energy spending of around $150 per year in 2030, and more than $260 per year in 2035, due in part to a 6% increase in electricity prices by 2035.
In the near term, there’s likely not much policymakers can do about electricity prices, and therefore utility bills going up. Renewables are almost certainly the fastest way to get new electrons on the grid, but the completion of even existing projects could be thrown into doubt by the House bill’s strict “foreign entity of concern” rules, which try to extricate the renewables industry from its relationship with China.
“We’re running into a set of cost-push dynamics. It’s a hairy problem that no one is really wrapping their heads around,” Amarnath said. “It’s not really mainstream yet. It’s going to be.”
In some relief to American consumers, if not the planet, while it may be more expensive for them to cool their homes, it will be less expensive to get out of them: Gasoline prices fell 2.5% in May, according to the BLS, and are down 12% on the year.
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Voters are mad at Trump over rising bills, but assigning blame is complicated.
Electricity prices are rising and voters are mad about it — two facts that might seem to add up to a political victory for Democrats.
Environmental groups and elected officials alike are gearing up to use electricity prices against Trump, citing the president’s multi-pronged assault on renewables as the problem and promising to immediately bring them down as the solution. “Cheap is clean and clean is cheap,” Hawaii Senator Brian Schatz said at Heatmap House during New York Climate Week, echoing what has become essentially a universal talking point among climate activists.
The problem with that message, however, is that lowering electricity prices is really hard. In reality, the responsibility for high prices can’t be laid that the feet of any one person, party, or governmental body. What’s worse for Democrats: the voters seem to agree.
That’s not to say Trump isn’t giving Democrats a fighting chance.
“What’s interesting politically is that Trump started this term with cost of living being his single strongest issue, and now it’s his weakest,” Democratic political strategist David Shor said at an event hosted by the moderate Democratic group Third Way during New York Climate Week last week.
“A lot of the Democratic attacks trying to blame these energy price increases on Republicans have done well in our testing,” Shor said, and that there was “potential” for such attacks to be effective.
But the public’s views on energy go back further than January 20.
Trump won the 2024 election in part because of public outrage at rising prices across the board. Polling done during the campaign showed that Trump both had an advantage on cost of living issues in general and energy in particular. A Third Way poll conducted early last year showed that Trump had strong advantages on energy production, supporting manufacturing, reducing the cost of energy and gasoline, and the economy in general.
“While Biden was president, energy was one of his biggest vulnerabilities,” Shor said on the panel. “The flip side though, though, is that Democrats aren’t in charge anymore.”
According to polling by Heatmap Pro, voters largely don’t pin the fault for high electricity prices on Washington, D.C. They are more likely to blame “more demand,” their “ electricity utility,” or their “state government,” with roughly equal numbers blaming “the Biden administration and Democrats” and “the Trump administration and Republicans,” with predictable partisan splits.
And while the Trump administration is undoing tax credits for clean energy projects and unleashing regulatory hellfire on existing projects, the electricity price hikes we’re already experiencing are largely due to the cost of the poles and wires that transit and distribute electricity. In some cases, sharply rising demand has played a role, especially in the Mid-Atlantic and parts of the Midwest covered by PJM Interconnection.
Because the bulk of high energy costs are due to investments that have already been made — and can likely only be slowed down by new investments in longer-distance transmission — politicians are unlikely to find a way to lower costs, so much as perhaps slow down their increase. “Unfortunately, electricity rates are not going to go down. Our goal here is to minimize how much they go up,” Gretchen Kershaw, vice president of strategy at Grid Strategies, said on the same Climate Week panel as Shor’s.
Any politician running as a challenger can simply say that rising electricity prices are bad and force incumbents to take responsibility for it, even if they don’t have a plan to lower prices in the short term.
However, Democrats are in charge in some places that have seen large price increases, and that has tripped up their ability to make electricity price increases a marquee issue.
New Jersey, for instance, not only has some of the highest retail electricity prices in the nation, it has seen substantial price increases over the last five years as the state’s electricity market, PJM, has faced billions of dollars in new costs for capacity. Just in the past year, retail electricity prices in New Jersey have risen by over 25%, to around 25 cents per kilowatt-hour.
Along with Virginia, New Jersey’s gubernatorial election — held the year after the presidential election, is often considered a kind of mid-mid-term temperature-check for the country as a whole.
New Jersey is a solidly Democratic state, although one that swung considerably towards Trump in 2024. The Democratic nominee in this year’s governor’s race, Mikie Sherrill, is the favorite and should be able to ride the backlash against Trump to Drumthwacket, a.k.a. the New Jersey governor’s mansion. But with electricity prices at the center of the race, she has failed to dominate the polls.
Her Republican opponent, Jack Ciattarelli, has tried to pin the price increases on progressive policy, namely support for renewables, especially the troubled offshore wind industry, as well as efforts to prevent new fossil fuel power plants from opening.
One anti-Sherrill ad quotes the congresswoman saying, “We need to move into clean power. It’s going to cost you an arm and a leg, but if you’re a good person you’ll do it,” and describes her price freeze plan as just a way to “lock in” already high prices.
Sherrill’s campaign has hit back at the Republican Governors Association, which ran the ad, pointing out that the quote was actually Sherrill explaining how not to talk about climate and energy policy. In other words, Sherrill is getting tagged with the argument that she explicitly says Democrats should reject.
Sherrill has tried to go after utilities specifically in her campaign, and in August proposed a freeze on electricity rate increases.
There’s some indication that voters in New Jersey at least give an edge to Republicans on energy and electricity questions. In a Quinnipiac poll showing Sherrill leading Ciattarelli 49% to 41%, she had just a two-point lead on electricity prices, specifically, with 17% of the respondents not having an opinion.
In short, Sherrill was right to be concerned about how voters perceive Democrats when it comes to electricity prices.
“Democrats have to be very careful,” Shor said. “If you just ask people ‘what party do you trust more to keep energy prices down’? Historically, that’s something that Republicans have massive advantages on.”
On disaster aid, rare-earth magnets, and China’s green steel
Current conditions: Hurricane Humberto has strengthened into a Category 4 storm as it makes its way northward, likely hitting Bermuda with heavy rainfall by midweek • Vietnam is evacuating thousands and canceling flights as Typhoon Bualoi makes landfall • Temperatures are surging to 113 degrees Fahrenheit in Paraguay, where the risk of wildfire is rising.
The federal government could shut down as early as Tuesday if Congress doesn’t agree to a funding bill. Over the weekend, Republicans urged Democrats to join together to approve a short-term spending bill to stave off a shutdown. Democrats are under pressure to leverage the risk of a shutdown to halt what their supporters see as the more authoritarian actions of the Trump administration. But, as I reported in this newsletter last week, President Donald Trump has threatened to use the temporary closure of federal agencies to institute “mass firings” that could affect the remaining government workforce in charge of climate research, clean-energy financing, and weather forecasting. The risk comes right as Hurricane Humberto and Tropical Storm Imelda gather strength en route toward the East Coast, making steady federal data critical.
About 85% of the federal government’s 25,000 disaster employees would be exempt from furloughs, according to a September 19 memo from the Department of Homeland Security. The National Weather Service, meanwhile, would continue to issue warnings even if Congress doesn’t approve new spending at the end of the fiscal year on Tuesday at midnight, E&E News reported. But a showdown could trigger a lapse in coverage under the National Flood Insurance Program, according to Fox News. That could pose a serious problem to South Carolina, which faces severe flooding if Imelda makes landfall later this week as expected.
A federal judge has blocked the Trump administration’s bid to condition access to disaster aid on whether states participated in immigration authorities’ crackdown, E&E News reported on Friday. In a decision handed down last week, Judge William Smith of the U.S. district court for the District of Rhode Island called the Department of Homeland Security policy threatening distribution of billions of dollars in funding “coercive,” “hopelessly vague,” and “unlawfully ambiguous.”
The effect of halting payments to states is severe. As Heatmap’s Emily Pontecorvo explained in March when states first sued over the Trump administration’s decision to hold up funding from the Federal Emergency Management Agency, the consequences of losing access to money come swiftly. She wrote: “If Hawaii doesn’t start receiving reimbursements for its federally-funded case management program by March 31, for example, it will be forced to immediately discontinue its work helping more than 4,000 wildfire survivors create tailored disaster recovery plans and navigate recovery resources."
Niron Magnetics started construction on a new 1,500-ton-per-year permanent magnet factory in Sartell, Minnesota. The company, spun out of Department of Energy research, is among the first to move forward on new domestic manufacturing capacity of a product of which the U.S. wants to claw back control from China. The privately-held Niron already has commercial partners: Stellantis, Samsung, Allison Transmission, and Magma.
While Trump’s signature One Big Beautiful Bill Act killed off the electric vehicle tax credit that was widely seen as an important demand signal for critical minerals, the administration has sought to bolster production of both the metals and magnets. Over the summer, the Department of Defense bought a large stake in MP Materials, the only rare earths producers in the U.S., making the biggest intervention in a private market since the country’s railroads were nationalized in World War I. The boldness of the move made Biden administration officials jealous, as Heatmap’s Matthew Zeitlin reported in July.
China made history this summer by selling its first shipment of steel forged with green hydrogen to Europe, in a sign Beijing was vaulting ahead of the U.S. on overseas sales of zero-carbon steel. But China’s plans to clean up its steelmaking industry are faltering amid a shortage of the electric-arc furnaces needed to replace traditional coal-fired steel production, Bloomberg reported. New analysis by the Centre for Research and Clean Air found that China will generate roughly 10% of its total steel output this year from electric-arc furnaces. That’s far below the global average of 29%. By comparison, the U.S. — which reduced its coal-fired steel production over the past half century — uses electric-arc furnaces for 72% of steelmaking.
China’s solar installations, meanwhile, fell to a three-year low following electricity market reforms that reduced domestic demand, as this newsletter reported in July. The country added just 7.36 gigawatts of panels last month, down a third from July, before the policy changes kicked in.
Rosatom, Russia’s state-owned nuclear power company, is building the vast majority of newcomer countries’ debut atomic energy stations worldwide, from Egypt to Turkey to Bangladesh to Iran. Now the Kremlin has inked an even bigger deal to expand nuclear energy production in the Islamic Republic. The $25 billion deal announced last week came as the United Nations voted to reimpose sanctions on Iran.
Brazil's solar boom.EIA
Brazil has long benefited from an electrical system built around hydropower plants. But distributed solar is now the fastest-growing source of new generation in the South American country. Distributed solar capacity grew from less than 1 gigawatt in 2018 to 40 gigawatts this year as of June, according to data from the U.S. Energy Information Administration.
From the notebooks of Heatmap’s reporters and editors.
The three letter acronym I heard the most during New York Climate Week wasn’t EPA, COP, NDC, or GHG. It was PJM. The country’s largest electricity market — the PJM Interconnection, which reaches into 13 states, including Pennsylvania, Ohio, Virginia, and Michigan — has become the poster child for data center growth, clogged interconnection queues, and political backlash to rising electricity prices. Nearly every conversation I have about PJM includes a preamble about how nerdy and impenetrable the whole field of wholesale electricity markets is. Even so, it’s quickly becoming a central preoccupation of the political system, especially in states like New Jersey, where electricity prices have become a central issue in the gubernatorial campaign. — Matthew Zeitlin
As expected, this climate week featured lots of chatter about artificial intelligence — both the pros and the cons. On Tuesday, I attended an actual debate on the topic hosted by Deloitte, titled “AI for Sustainability: Friend of Foe,” which asked four participants to argue for or against a strongly worded motion: “AI is humanity’s best hope for tackling climate change.” To be frank, I disagreed with the premise before either side launched into their arguments, as did many others in attendance. When the audience was polled ahead of time, 49% disagreed, 36% were undecided, and 15% agreed.
The AI advocates — Riaz Raihan of Trane Technologies and Jen Huffstetler, HP’s chief sustainability officer — did share a few striking figures. Raihan, for instance, noted that Trane’s AI platform can make HVAC systems up to 25% more efficient. If that tech were deployed worldwide, it would save significantly more power than all the world’s data centers currently consume. But it was ultimately David Wallace-Wells of the New York Times who expressed the sentiment that I found most compelling when he cited the very human problems that keep renewable energy projects stuck in interminably long interconnection queues for years.
“What is it that’s stopping that renewable power from getting online. Is it a lack of intelligence? Is it too limited, too scarce intelligence? Or is it the human challenges, the concrete, real-world challenges? How do we deal with politics? How do we deal with land use? How do we prioritize what we’re doing in this world?” Ultimately, the audience appeared persuaded by his arguments, too — as well as those of his co-debater, Sarah Myers of the AI Now Institute. When the debate was over, 78% of the audience disagreed with the motion, 16% agreed, and 6% remained undecided. — Katie Brigham
At this point, I think we’re used to the idea that the artificial intelligence boom is creating more demand for electricity — and that this higher demand is helping renewable developers during what would otherwise be a tough moment. One theme that stuck out to me at New York Climate Week, though, is how much the surge in Big Tech investment is harmonizing what used to be otherwise regional markets.
Because a relatively small number of companies are driving such a large share of electricity capex, utilities across the country — who would normally do business with residential developers or small-to-medium-sized industrials — are now working with the same few tech firms. Those firms have the same sorts of demands everywhere. And because those tech firms are so flush with cash (and so far from achieving their climate goals), they are becoming important buyers for early-stage climate tech products. In that way, the AI boom — whose first-order labor effects have been quite concentrated in the San Fransisco area — is already transforming the U.S. economy. — Robinson Meyer
Here at Heatmap, we promise to bring you the “inside story of the race to fix the planet.” I’m biased, of course, but I think we tend to deliver, and my colleague Emily Pontecorvo certainly did this week with her story on the obscure accounting debate that has the potential to reshape our emissions future for years to come. We’re talking specifically about the Greenhouse Gas Protocol, the primary standard-setting body for corporate carbon accounting, which is in the process of revising its guidelines for how companies should report the emissions from the electricity they consumer, otherwise known as scope 2 emissions.
While it hasn’t cracked the headlines in many places, Amazon Director Sustainability Policy told the crowd at our Heatmap House event on Wednesday that it was on everyone’s minds all week — and indeed, it came up over and over again during our “Up Next in Tech” session. I’ll spare you the details of the debate (though you should definitely read Emily’s story), but suffice it to say that it comes down to some pretty profound questions about why we count emissions in the first place. Is it to help consumers make informed choices? Or is it to help decarbonize the global economy? — Jillian Goodman