President Joe Biden’s policies are driving up electricity costs and are poised to continue to do so, according to one of the biggest banks in the U.S.
The Bank of America Institute issued a July 2 note titled “Powering the Revolution,” in which analysts stated that year-over-year energy price inflation reached 5.9% in May compared to 3.8% in January. The note’s authors wrote that trends driven by signature Biden administration policies like electric vehicle (EV) demand, increased heat pump adoption, new data centers to enable artificial intelligence (AI) development and manufacturing capacity expansion are likely to cumulatively drive prices higher in the long-term.
“Consumers have had some respite from rising utility bills recently, with the year-over-year median utility payment per customer declining 1.4% in the three months to May, according to Bank of America internal data,” the note states. “However they are still paying a lot more than in 2019, and the price of some utilities, including electricity, has been rising, suggesting that any relief could be short-lived.”
“At the same time, electricity demand is actually increasing, pressuring supply, and it may continue to do so for a long time as industrial onshoring and the AI revolution are both turbo-charging the need for generating capacity,” the note continues. “This demand for significant investment in generation and related distribution infrastructure could be a headwind to consumers’ utility bills for the foreseeable future.”
The note specifically mentions increased EV and heat pump adoption as possible factors driving demand higher, as well as increased industrial activity attributable in part to subsidies unleashed by two of Biden’s signature bills, the Inflation Reduction Act (IRA) and the CHIPS Act. The AI boom alone could require between 18 and 28 gigawatts (GW) of electricity by 2026, according to the bank, and the gradual return of manufacturing capacity to the U.S. also figures to increase demand.
“While the gyrations of global commodity prices, especially for fossil fuels, will likely continue to impact the price consumers pay for energy, the need for extra capacity in the electricity generation system may well act as a headwind to any prolonged drop in their utility bills,” the note states. “Given the larger relative share of income that utility bills account for amongst those with lower incomes, as well as older generations, the overall impact on consumers will need careful monitoring.”
The report also charts the burden of utility payments by consumers’ age cohorts, finding that elevated bills hit young consumers and older buyers especially hard.
Grid watchdogs have warned that the U.S. is simultaneously pursuing a course that increases electricity demand while shutting down reliable, affordable fossil fuel-fired capacity to be replaced by intermittent green generation like wind and solar. This trend has elevated concerns about possible supply crises in the future, and some reliability assessments have already identified power systems serving huge swaths of the country as potentially at risk for supply crunches in strong winter or summer weather conditions.
The note is based largely on internal Bank of America information and transaction data, and its authors point out that the information they used for their assessment “may reflect a degree of selection bias and limitations on the data available.”
The White House did not respond immediately to a request for comment.
