Your electric bill may climb an extra $500, according to a new report

Hearing that your electric bill is rising is starting to feel like a broken record, but here we are again. A new analysis shows electric costs are about to surpass what the government’s own forecasters expected.

A July 2026 report from the nonpartisan think tank Energy Innovation found that a wave of federal energy policy changes made over the past year and a half will cost American households an additional $650 billion in energy spending through 2040. That works out to roughly $460 more per household in 2035, and $490 more in 2040—on top of everything else already pushing electricity prices upward, like an aging grid and surging demand from AI data centers.

We spoke with Robbie Orvis, Senior Director of Modeling and Analysis at Energy Innovation and co-author of the report, to break down what’s happening and why it matters for anyone paying a utility bill.

Orvis’s team used a detailed model to isolate the impact of one specific thing: what happens if you strip away the clean energy tax credits, emissions rules, and permitting support that were in place as of January 2025, and replace them with the policy environment as it exists today.

"Your energy bills are going up, and they're going to go up more than they otherwise would have," Orvis said. "We found that due to the energy policy changes at the federal level over the last 18 months, we expect that household energy bills will be about $460 per year higher by 2035."

Importantly, this isn't a projection of total energy costs. It's the extra amount households will pay because of policy changes alone, layered on top of everything else already straining the grid—like AI-driven demand growth, an aging transmission system, and general inflation.

"The only thing we're changing are the federal clean energy-oriented policies that have changed over the last 18 months," Orvis explained.

And the pain won't be evenly distributed. Regions with heavy data center buildout, like Virginia, are expected to feel it more acutely. "I live in Northern Virginia, the home of the ‘data center apocalypse’ that's happening," Orvis said. "I would expect that over the next five years, my utility bills might go up a lot more."

Even federal energy analysts didn't see this increase coming. The U.S. Energy Information Administration's own short-term forecasts from early 2025 projected average electricity rates would land around 17.32 cents per kilowatt-hour this year. Instead, actual rates are tracking closer to 18.11 cents—a gap that adds roughly $70 more per household this year than expected, based on average household usage of about 10,500 kWh annually.

The gap traces back to the grid's supply side. Over the past year and a half, federal incentives for building new wind and solar have started phasing out, while pollution rules that would have pushed the oldest, dirtiest power plants into retirement have been rolled back. The result: aging coal and gas plants are staying online longer, right as electricity demand is spiking.

To be clear, this isn't because renewable energy suddenly got more expensive. Solar and wind projects remain the cheapest new electricity to build. It's that old, expensive plants got a reprieve to keep running, just as new, cheaper plants got harder to build.

The numbers back this up. The average U.S. home already paid about $110 more for electricity in 2025 than in 2024, and this year's prices put households on track for another $136 increase. If that pace continues, some estimates suggest households could be paying about $1,400 more per year by 2040—suggesting the report's $460–$490 figures are the more conservative, policy-specific estimate.

Energy Innovation's report points to a specific set of federal actions passed since January 2025, including the One Big Beautiful Bill Act (OBBBA), EPA rollbacks of power plant pollution standards, and reduced support for wind, solar, and clean vehicle development. Together, these changes are expected to:

• Shrink new clean energy capacity. The report projects 68 GW less new clean energy capacity added annually between 2031 and 2040 compared to earlier forecasts, with the steepest cuts to onshore wind, solar, and grid battery installations.

• Keep coal plants running longer. Instead of shrinking to under 20 GW by 2035, coal capacity is now projected to remain around 100 GW that year.

• Slow EV adoption. Electric vehicles are now projected to make up just 23% of new passenger vehicle sales in 2035, down from an earlier projection of 68%.

• Raise gasoline prices. Reduced support for vehicle electrification is expected to push gas prices up 37 cents per gallon by 2035 and 64 cents by 2040.

• Cost jobs and economic output. The report estimates a cumulative $2.3 trillion in lost GDP through 2040, along with roughly 810,000 fewer jobs in 2030 alone, concentrated in manufacturing.

• Raise healthcare costs. Extending the life of coal plants and combustion vehicles is projected to increase pollution-related healthcare costs by $43 billion through 2040.

Orvis said the health impacts are easy to overlook but very real. "Your air quality is getting worse," he said. "That will lead to more illness—think asthma and other respiratory problems. And those things have real costs associated with them, whether you're going to the doctor or your children have to stay home from school, and then that takes you away from work."

The jobs picture tells its own story. While the fossil fuel sector's contribution to GDP is projected to grow under current policy, that growth doesn't translate into proportional employment. "The fossil fuel sector is not as labor-intensive," Orvis said. "To produce a dollar of oil or gas requires many fewer labor hours than manufacturing or construction." That's part of why the report finds job losses are proportionally steeper than the fossil industry's GDP gains—the clean energy manufacturing and construction jobs being lost are simply more labor-intensive than the drilling and extraction jobs replacing them.

In short, rolling back clean energy policy doesn't just affect climate goals. It shows up directly on utility bills, gas station receipts, and even hospital bills.

Not every trend is moving in the wrong direction. Even as new EV incentives disappear and some new model launches get delayed, Orvis points to the used electric vehicle market as a genuine bright spot. Especially since oil prices climbed following the outbreak of the war in Iran.

"The used EV market is booming right now in the U.S.," Orvis said. "You can find some great deals out there as cars are rolling off leases and they have pretty low mileage." For drivers priced out of a new EV, that's an increasingly practical way in.

Orvis speaks from experience. He and his family own two plug-in hybrid vehicles, and he's noticed the payoff. "Every time I drive by the gas station, I'm kind of like, 'Wow, gas has gotten expensive. I'm glad I don't have to fill up right now,'" he said.

The biggest sting of this report? Just as utility bills are set to climb, some of the tools that help households avoid those costs have also taken a hit. The 2025 federal budget law eliminated the residential solar tax credit and several other incentive programs that made going solar more accessible.

"As utility bills go up, rooftop solar looks better and better," Orvis said. "Of course, the One Big Beautiful Bill Act did cut a lot of the incentives and funding programs for rooftop solar, so it looks less attractive now than it might otherwise."

But the math still tends to favor solar, especially in states with strong local programs. "Some states have really generous net metering programs," Orvis said. "That means you get paid, maybe your full utility rate, for electricity that you displace and even that you feed back to the grid."

The savings involved with going solar vary by state, but with electricity rising at unpredictable rates, that savings figure is expected to climb as well. Let’s put it to the test.

Say your electric bill keeps climbing at a fairly typical historical pace (without factoring in the more dramatic increases this report projects) you'd spend close to $88,000 on electricity over the next 30 years. Go solar instead, and the math looks different: an average system costs around $31,000 upfront, but most homeowners pay it off within about 10 years using their electric bill savings. After that, their electricity costs drop close to zero, adding up to roughly $61,000 in savings compared to sticking with the utility.

For homeowners who don't want to pay upfront, solar leases offer a $0-down option with a predictable monthly payment that's typically lower than a utility bill from day one, with total savings closer to $30,000 over time.

And the benefits go beyond dollars and cents. Orvis points to Winter Storm Uri, the 2021 Texas grid failure that left some customers on unhedged retail electricity plans with bills in the thousands of dollars, as a stark reminder of what volatile pricing can look like. Orvis said there’s undeniable value in making the investment in solar and storage.

"It goes into the value of your house. It helps with backup if the grid goes down. There are lots of reasons even beyond just the pure dollars and cents from my utility bill, including stability, that can be worth it." As Orvis puts it, homeowners going solar are essentially paying a premium for peace of mind, one that a growing number of experts think is worth it.

Solar isn't the only lever homeowners have. Orvis points to a few additional steps that can help offset rising costs:

1. Improve home efficiency. LED lighting has gotten significantly cheaper, and sealing up windows and doors can cut significant energy waste, lowering your bills. Many utilities offer rebates for these upgrades.

2. Check your utility rate plan. Some utilities offer rate structures that better match your actual usage patterns and could lower your bill without any other changes.

3. Get involved locally. "So much of our energy policy is determined by public utility commissions or public service commissions at the state level, and they very often have open processes," Orvis said. Attending these meetings—something almost nobody does—is often where real decisions about rates and infrastructure get made.

There is a silver lining in all of this. Orvis points to three signs of a resilient clean energy market, even amid the policy rollbacks: the strong used EV market, continued record-setting utility-scale solar deployment, and falling technology costs across the board.

"Solar is expected to continue setting records over the next few years for how much of it's being deployed," he said. "Utility bills are going to continue to go up, but the other heartening thing is that we still are seeing capital costs continue to fall for clean energy technologies, for EVs, for batteries, for solar, for wind."

With utility rates on a clear upward path and federal incentives shrinking, the case for locking in your own energy costs is only getting stronger. Compare quotes from vetted solar installers on EnergySage to see what going solar could save you.