Understanding What's Really Driving Energy Costs

On December 12, an article was published by Robert Rio on the topic of why energy bills are rising but emissions allegedly aren’t falling. The article claims it isn’t anti-clean energy, but poses a series of questions which, knowingly or not, points blame for rising energy bills directly at renewables and clean energy policies. The article goes on to use data cherry-picked from particular days to support the conclusion that emissions are not falling.

Affordability should be at the forefront of energy conversations. However, to address the affordability question successfully, the Commonwealth must take a holistic view of the factors driving affordability. This blog provides answers to some of the questions the article asks and data-driven responses to some of the statements made – demonstrating that, in the face of the many factors which are leading to higher bills, renewables are both helping affordability and reducing emissions.

Instead of misplacing blame on renewables, a better approach to affordability for the Commonwealth would be to focus on the true cost drivers of climbing electric rates, including fossil fuels and volatile supply costs, utility business models and oversight (or a lack thereof), and aging infrastructure in a heavily forested area of the country with storms which are increasing in severity and frequency. The Commonwealth also has an opportunity through it’s recently opened investigation into bill transparency to ensure ratepayers understand the costs and cost savings of charges on their bill, helping to buoy the truth that renewables and energy efficiency improve affordability while also decreasing emissions.[i]

Claim 1: “Absent renewables and storage coming way down in cost—or more supply coming online—bills aren’t going to fundamentally change.”

The article claims that “[a]bsent renewables and storage coming way down in cost—or more supply coming online—bills aren’t going to fundamentally change.” This statement starts in the wrong place and ends with the wrong conclusion.:

Recent gas and electric rate increases have been driven primarily by non-supply factors such as transmission and distribution (T&D), which are not affected by changes in supply of fuel or power. This trend is true in the northeast and across much of the U.S.[ii]
Overreliance on a single fuel – natural gas – is driving price increases. New England has expanded interstate gas transmission capacity by over 30% since 2010. At the same time, the consumption of natural gas in New England was only 2.6% higher in 2023 than in 2010—largely due to persistently increasing usage in Connecticut. In Massachusetts, gas usage actually went down nearly 14% from the year of peak usage, 2011, to 2024, the most recent year with data available.[iii]^,[iv] Yet, electricity prices still increased. This is in part due to the export of U.S. natural gas in the form of liquified natural gas (LNG) to Europe and elsewhere abroad, tying gas prices to global markets, where prices are much higher.[v] LNG exports are expected to continue to rise and, consequently, so are gas prices – and it has increasingly less to do with the supply-demand balance at any given time in the region.[vi]
Renewables and storage are coming way down in price – fast: Over recent decades, renewables have become considerably cheaper. Between 2000 and 2020, the cost of useful energy from wind, solar, and battery storage decreased by 72%, 90%, and 94%, respectively.^[vii] In fact, prices have declined so quickly that studies incorporating cost projections to model future adoption systematically overestimate the costs of renewable energy because the modelling of price decreases is not able to keep up with how quickly costs are actually going down.[viii]

Figure 1: Historical costs of energy sources. Source: Way et al.[ix]

And prices continue to drop – for example, between 2023 and 2024, battery equipment costs fell 40%, and they are on track for another substantial decrease in 2025.[x] These dropping costs have translated to electric rates. Over the last twenty some-odd years, there is an observed trend across the country – which holds true in the Northeast – of smaller electric rate increases in states that get a higher percentage of their energy from renewables, regardless of whether those renewables are market-based independent power producers or state procured resources.

Figure 2: Change in Electricity Prices vs. Change in Renewable Penetrations. Source: EIA[xi]

The cost of developing renewables in the northeast is higher than in other parts of the country and the world, but the bulk of those costs are “soft costs” associated with non-equipment/non-technology factors such as permitting, interconnection, red tape associated with other bureaucratic approvals, and beyond – all of which can and should be addressed by policy reforms. At the same time, however, every generation resource – including natural gas and nuclear – has been exposed to rising costs from inflation and supply chain disruptions over the last three to five years.
Bills may not “fundamentally change” due only to clean resources – but the prices would be even worse without renewables. Recent price increases are real and having very significant impacts on energy burdened families. And it may be that bills won’t fundamentally change (though it is not clear what exactly a “fundamental change” would look like) without putting more affordability tools in place beyond clean energy resources. However, it is critical for the public understanding of energy that cost increases be appropriately and accurately attributed. There are a number of electricity cost drivers, including volatile fossil fuel costs, utility business models that incentivize the implementation of expensive grid solutions, aging infrastructure in need of replacement, and elevated storm response costs due to increasingly severe and frequent storms in the Northeast. As examples, 1) nearly half of transformers in the United States are approaching their end of life, indicating the age of the electric grid, and 2) in Massachusetts, where National Grid historically budgeted for 4 major storms a year, there were between 9 and 14 a year from 2020-2022, leading to over $100 million more in spending than was budgeted for storm response costs.[xii]
On the contrary, renewables have in fact been helping to mitigate rate increases. If solar and storage are deployed at a rate that meets policy projections, the difference in deployment between 2025 and 2030 levels will reduce New England energy costs by $684 million annually, with over $313 million in annual savings for Massachusetts customers alone – not accounting the $432-721 million in benefits from avoided greenhouse gas emissions.[xiii] In Vermont, a battery lease program already helps customers ride through blackouts and saves customers millions annually, and adding 3.5 GW of offshore wind could have provided Massachusetts customers net savings of $105 – $212 million if online in Winter 2024/25.[xiv]^{, [xv]}
So, while bills may not fundamentally change much without further action to bring them down – the reality is that bills are not rising even more because renewables are helping to keep costs down, despite short-term natural gas cost increases.

Claim 2: “If higher bills were clearly delivering lower emissions, the tradeoff might be easier to explain.”

The article also claims that emissions aren’t decreasing. Specifically, it notes that “If higher bills were clearly delivering lower emissions, the [cost] tradeoff might be easier to explain.” There are two major flaws with this claim: the data shows that renewable energy is both helping to combat rising prices, as discussed above, and clearly lowering emissions. As seen in the Annual Emissions plot below, New England’s grid emissions of all types, carbon dioxide, nitrogen oxides, and sulfur dioxide, are all down in the past decade (especially considering the dip in generation and emissions during COVID).[xvi]

Figure 3: Annual Emissions in New England. Source: ISO New England.[xvii]

Similarly, in Massachusetts, emissions across all sectors, and in the electric sector specifically, are down substantially since the early 2000s (see Figure 4).[xviii] This highlights how, while we may have days where the resource mix is more or less polluting in Massachusetts, overall, renewable deployment is leading to cleaner air for the state, in addition to helping increase energy affordability.

Figure 4: Massachusetts Gross Emissions by Year. Source: MA Executive Office of Energy & Environmental Affairs.[xix]

The data presented thus far in terms of renewable affordability and emissions lead directly to the first question posed in “Why Your Energy Bill Is Rising — But Emissions Aren’t Falling” that Acadia Center will address.

Question 1: When will renewable energy pay off?

The article questions when the payoff of renewables will be seen. The answer is clear: right now. Renewables are currently helping to deliver cheaper electricity prices and reducing emissions, even in the face of numerous other factors that are increasing electric bills. New major influxes of clean energy will provide further assistance as well, such as the $50 million in annual bill savings expected for Massachusetts residents thanks to the hydroelectric power now beginning to flow over the New England Clean Energy Connect (NECEC) transmission line from Quebec.

We are also seeing a tremendous payoff from energy efficiency. Ratepayers in Massachusetts have saved from the Mass Save program, even if they’ve never utilized the program themselves. When electricity prices rise during heatwaves or cold snaps, energy efficiency mitigates price swings by reducing the demand for electricity that would otherwise be needed. Thanks to the efficiency program, Massachusetts’ electricity demand is 27.7% lower than it would have been absent the existence of the program. This means billions in lifetime savings on avoided supply and infrastructure costs. In total, Mass Save provides $2.69 of value for each $1 invested.[xx] While the article questions whether that value is inflated, even if benefits were half of what they have been found to be, the program would still have an impressive return on investment.

Question 2: “How do we reduce skyrocketing winter emissions before reliable, affordable alternatives are in place?”

The article goes on to question how we can reduce skyrocketing winter emissions before reliable, affordable alternatives to expensive fossil fuels are in place. First, it should be pointed out that “skyrocketing winter emissions” is misleading – as annual emissions have been substantially reduced in recent years (see plots in previous sections). Putting that aside, the answer to the question does not have to be exclusive of reliable, affordable alternatives – in fact, it depends on them. Mass Save will continue to provide additional savings to ratepayers by reducing electricity demand, so long as it is fully funded. Renewables – which improve affordability and are rapidly declining in cost – are also the quickest energy resources to build (see below plot).[xxi] Therefore, building more renewables and energy storage (particularly to align production with winter peaks) should be a focus for grid reliability, reducing energy costs, and decreasing emissions. By adding storage, clean energy can more effectively shave peak demand, reducing the need for expensive, dirty, fossil-fuel peaker plants and expensive infrastructure upgrades that would otherwise be needed to accommodate only a few peak usage hours a year.

Figure 5: Average U.S. Power Plant Development Timeline by Technology. Source: SEIA.[xxii]

Conversely, things are getting worse for fossil fuel powered energy. It now takes at least six years to bring a gas-fired power plant online, and since 2022 the full-scope cost of a combined-cycle gas turbine plant has more than tripled.[xxiii]

Additional solutions to help reduce costs are to implement new technologies, such as grid-enhancing technologies (GETs) and virtual power plants. GETs are advanced hardware and software – such as dynamic line ratings, power flow control devices, and advanced sensors – that increase the usable capacity and efficiency of existing grid infrastructure. Their implementation can cost less than 5% of the annual congestion costs they help eliminate, and they are often cheaper than traditional poles and wires solutions.[xxiv]

Virtual power plants are networks of distributed energy resources – such as rooftop solar, batteries, electric vehicles, and smart appliances – coordinated through software to operate as a single power plant. Like grid enhancing technologies, they are often cheaper to install than “traditional” alternatives: 40-60% cheaper than generation and storage alternatives. They also can be implemented in as little as 6-12 months, helping to avoid multi-year transmission upgrades.

Question 3: How much more can people take?

Lastly, the article inquires about how much cost households and businesses can absorb before public support erodes.

The short answer: not much.

Between 2022 and 2024, investor-owned-utility (IOU) residential electricity rates increased 49% more than inflation.[xxv] Looking at the bigger picture of household economics, between 2001 and 2024, median wages – adjusted for a minimum quality of life – decreased by 4%.[xxvi] Part of the reason for that decrease is skyrocketing costs, including costs driven by emissions, to which fossil fuel-based energy generation is a large contributor. For example, fossil fuels pollute the air and environment, leading to increased medical costs and excess deaths due to pollution.[xxvii]^{, [xxviii]} They also emit greenhouse gases which worsen climate change, leading to increased storm response and restoration costs.[xxix] Insurance premiums also suffer: the average US homeowner’s insurance premiums increased 8.7% faster than inflation from 2018–2022, with sharp spikes in climate-exposed regions.[xxx] In fact, households are already paying between $400 and $900 annually due to climate-driven costs – and that is likely an underestimation, as the analysis only considered a subset of all fossil-fuel related costs.[xxxi]

Such findings place an added emphasis on the importance of clean, affordable energy and programs like Mass Save. Not only can energy efficiency and renewables help keep electric costs lower, but they also have the added benefit of mitigating these “hidden” costs of fossil fuels, which people pay without considering them part of their household energy budget. Accordingly, Acadia Center believes policymakers and energy bills should be more transparent to ratepayers across the state how renewables are saving them money. This aligns well with a recent investigation launched by the Massachusetts Department of Public Utilities (DPU) regarding utility bill design, “increasing transparency for ratepayers when they receive their bills[,] and creating more consistency across companies.”[xxxii]

This investigation and subsequent outcomes will provide an opportunity for increased transparency regarding utility bill costs and benefits. For instance, while energy efficiency programs and renewables have some cost associated with them, they avoid other substantial costs – including millions in fuel costs daily during extreme weather.[xxxiii] The avoided costs due to these programs should be visibly included on bills, particularly if the costs of the same programs are included, either as individual line items or under a bucketed cost category (e.g., public benefits charges). Making avoided costs visible will help ratepayers understand both the costs and cost savings from the programs they are paying for, help mitigate any erosion in public support, and help improve understanding of the truth: renewables are decreasing emissions, improving local public health, and increasing electric bill affordability (by avoiding additional costs).

Plus, we don’t have to accept other “business-as-usual” approaches to paying for energy infrastructure. Forthcoming research from Acadia Center and other partners will examine, for example, how a greater use of public financing sources has the potential to significantly reduce the cost of electric transmission infrastructure build-out (stay tuned for more).