20 States That Have The Cheapest Electricity In The US
In this article, we’ll list states with the most affordable electricity prices and explain their power grid. If you want to skip why certain regions pay less for energy than others, read 5 States That Have The Cheapest Electricity In The US.
Global electricity demand is expected to see a 3.3% year-on-year increase by 2024, as forecasts for the economic outlook improve. Such high demand will almost certainly cause a spike in electricity prices, reminiscent of the 4.2% year-on-year increase observed between 2022 and 2023 — even in states with the cheapest electricity bills. Beyond pricing concerns, the environmental impact of electricity generation, and eventually consumption, is also a source of dread. As a result, over the past decade, scientists, policymakers, and industry leaders have reached a growing consensus regarding the urgent need to transition from fossil fuels to cleaner energy sources.
In the US, renewable portfolio standards (RPS) have played a crucial role in driving the adoption of renewable energy, which are intended to make the country's power grid more sustainable, along with increasing the number of states that have the cheapest electricity in the US. Currently, 31 states and the District of Columbia have mandatory RPS, while an additional 7 states have set voluntary environmental goals, according to the Energy Information Administration (EIA).
These policies mandate that states obtain a specified share of their electricity from renewable sources and make efforts to drive investments in renewable energy projects. In addition to RPS, some states have implemented even more aggressive clean energy standards, with goals to achieve 100% clean or renewable electricity by mid-century or earlier. For example, California has set a target of 100% clean energy by 2045, while New York has committed to 70% renewable electricity by 2030 and 100% clean energy by 2040. Similarly, Nebraska approved its first clean energy goal in 2021, becoming the 20th state to commit to 100% clean energy by 2050.
Also Read: 20 States With Most Expensive Electricity In The US
It is noteworthy that in the past, people were hesitant to invest in cleaner energy sources, such as solar panels, because they were 710% more expensive than ‘traditional’ fuel-fired solutions in the early 2000s. However, solar PVs now cost almost 29% less than their 2010 prices. As a result, renewable energy usage increased by 42% between 2010 and 2020, accounting for 20% of utility-scale US electricity generation.
But be warned that despite the reduction in costs for end customers, the significant expenses associated with renewable energy infrastructure and high-interest rates continue to deter investment in this sector. A notable aspect of renewables still being 'out of reach' for many can be the interest rate hikes by the Federal Reserve since early 2022, but regardless, the clean energy infrastructure itself costs a lot. So, while these costs may decrease further in the future, installation expenses currently limit the sector’s growth to a significant extent.
Therefore, in an effort to make the dream of affordable electricity in the USA a reality, the $430 billion Inflation Reduction Act (IRA) includes substantial financial incentives for renewable energy sources. The act is designed to empower homeowners wishing to upgrade to save energy and reduce their electricity bills. The IRA has allocated nearly $9 billion for consumer home energy rebate programs across all states, which will enable communities to make their homes more energy-efficient. The Department of Energy (DOE) estimates that these rebates, specifically targeted at lower-income consumers, will help save around $1 billion annually.
If more such targets are set and diligently followed, the impact of Countries That Contribute The Most To Climate Change can be contained.
Corporations Focusing On Clean Energy
According to a report by Reuters, clean energy stocks have suffered due to rising interest rates and material costs, resulting in a net outflow of $1.4 billion from the sector during the July-September quarter. Despite such short-lived setbacks, many Renewable Energy Companies like NextEra Energy Inc (NYSE:NEE) and Duke Energy Corp (NYSE:DUK) have set ambitious goals for the country.
NextEra Energy Inc (NYSE:NEE), a leading U.S. renewable energy producer, is managing a 16.5 gigawatt backlog of renewable projects, having expanded its portfolio by 25% in the past year. Furthermore, NextEra Energy Inc (NYSE:NEE) is enhancing its solar and wind capacities; as a result, its wind energy capacity has nearly tripled over the last decade. FPL SolarTogether, a subsidiary of NextEra Energy Inc, is poised to launch the largest community solar program in the country, introducing 17.8 gigawatts of new universal solar capacity to the nation’s electricity system, potentially serving around 300,000 customers.
Similarly, Duke Energy Corp (YSE:DUK) has recently formed a partnership with Ranger Power to purchase 199 megawatts of solar power from Indiana's Speedway Solar facility, ultimately supplying energy to approximately 35,000 homes. Duke Energy Corp (NYSE:DUK) has also increased its five-year capital plan to $65 billion, 85% of which is dedicated to low-carbon energy.
Also read: 20 Countries With Highest Cost Of Electricity
20 States That Have The Cheapest Electricity In The US
Our Methodology
To list the states that have the cheapest electricity in the US, we referred to the most recent cost chart on the US Energy Information Administration (EIA) website. The states with low electricity price rates were then listed in descending order based on their residential electricity prices for July 2023.
Based on our findings, here are the top states with economical electricity:
20. Missouri
Electricity Cost in Cents per Kilowatt-Hour (kWh): 14.66
Missouri's energy generation primarily derives from coal, nuclear, and renewable energies, ensuring a reliable power grid. The state's plentiful coal reserves facilitate electricity production at a reduced cost, minimizing transportation and procurement expenses. According to the EIA, coal accounted for 66% of Missouri's electricity net generation in 2022. It is noteworthy that Missouri consumes almost eight times more energy than it produces and ranks fifth in the state for per capita energy consumption in the residential sector.
19. West Virginia
Electricity Cost in Cents per Kilowatt-Hour (kWh): 14.11
In West Virginia, electricity costs are influenced by its abundant natural resources, particularly coal. The state contributes 14% of the country's coal, with approximately 91% of its net electricity generation stemming from coal-fired plants. Consequently, the reliance on locally sourced coal helps maintain low transportation and production costs, translating to more affordable electricity for consumers.
Additionally, the state's relatively low population density contributes to less strain on the power grid, resulting in reduced maintenance and infrastructure costs for utility companies. It is also noteworthy that West Virginia is in the early stages of transitioning to sustainable electricity, with renewables constituting a mere 5% of its power production.
18. Virginia
Electricity Cost in Cents per Kilowatt-Hour (kWh): 13.98
Virginia is among the states with affordable electricity, attributed to its balanced energy portfolio and strategic geographical location. Almost 57% of the state's net electricity generation is sourced from natural gas, and nuclear power comprises 30%. Other smaller electricity fuel sources include solar and wind power plants, together accounting for 9% of net generation, while coal represents 4% of Virginia's electricity.
The Bath County Pumped Storage Station, owned by Dominion Energy Inc (NYSE:D), is the largest power plant in Virginia, boasting a net electricity generating capacity of 3.003 gigawatts. It is also the largest pumped-storage hydroelectric plant in the US and the second-largest globally.
Dominion Energy Inc (NYSE:D) has plans, according to Reuters, to enhance its solar generation capacity in Virginia to 4.6 gigawatts, capitalizing on federal incentives for clean energy. This project will help Dominion Energy Inc (NYSE:D) add six solar plants in the state and include 13 power purchase agreements, collectively amounting to a capacity of 772 megawatts. Additionally, Dominion's Coastal Virginia Offshore Wind Project is on schedule for completion by 2026.
17. Texas
Electricity Cost in Cents per Kilowatt-Hour (kWh): 13.83
Texas promotes a competitive electricity market, potentially leading to lower consumer prices. The state's extensive size and vast natural resources, including wind, offer a variety of affordable electricity sources. Texas is a national leader in wind energy production, accounting for approximately 26% of the state's net electricity generation, and is also among the states with the largest refining capacity. The state's advanced power grid affirms its position as the largest electricity-generating and consuming state in the US.
16. South Dakota
Electricity Cost in Cents per Kilowatt-Hour (kWh): 13.23
South Dakota is among the states with low electricity rates, attributable to its rich natural resources and small population. Much of the state's electricity is generated from hydroelectric power, courtesy of the Missouri River, providing a reliable and cost-effective energy source. In 2022, renewable resources contributed approximately 84% of South Dakota's total in-state electricity net generation, as reported by the EIA. Of this renewable electricity, wind energy is predominant, supplying 55% of the state's total in-state net generation.
15. Oregon
Electricity Cost in Cents per Kilowatt-Hour (kWh): 13.12
Oregon's commitment to renewable energy sources plays a significant role in shaping its electricity costs. The state has invested heavily in hydroelectric, wind, and solar power. In FY 2022, hydroelectric power comprised approximately 54% of Oregon's net electricity generation, followed by wind energy at 14%. Presently, the state's installed wind-powered generation capacity is 4 gigawatts, and renewables collectively fuel 70% of its electricity generation projects.
14. Montana
Electricity Cost in Cents per Kilowatt-Hour (kWh): 13.10
Montana ranks among the top 10 states in producing electricity predominantly from renewable sources, with clean energy sources accounting for about 53% of its total electricity generation. However, the state still generates approximately 42% of its electricity from coal-fired plants since it possesses the largest recoverable coal reserves in the country. This reliance on coal raises significant sustainability concerns, even as advancements in renewables continue.
13. Mississippi
Electricity Cost in Cents per Kilowatt-Hour (kWh): 13.03
Mississippi is also among states with affordable electricity, thanks to its dependence on natural gas and nuclear power, both of which provide cost-effective energy sources. The state houses the 1.443 gigawatt Grand Gulf Nuclear Power Station in Port Gibson, the largest single-reactor nuclear power plant in the US by generating capacity. Additionally, Mississippi's geographical location in the Gulf Coast region, rich in underground salt caverns, facilitates access to natural gas resources, aiding in maintaining low production and transportation costs.
12. North Carolina
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.71
North Carolina demonstrates a robust commitment to renewable energy, evidenced by its ranking as the state with the fourth-highest installed solar generation capacity. A considerable portion of its electricity is generated from nuclear power, a low-cost energy source compared to renewables. North Carolina is also among the top 10 electricity-consuming states in the country, with its transportation sector accounting for a significant portion of this consumption.
11. North Dakota
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.57
North Dakota's electricity costs are influenced by its coal reserves, which fuel approximately 55% of its power plants. On the sustainable end, wind energy accounts for 37% of its net electricity generation, ranking it fourth-highest in the state-level share of wind energy.
10. Arkansas
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.52
Arkansas enjoys low electricity costs, thanks, in part, to its robust capacity for natural gas production. Natural gas accounted for 38% of the state’s electricity generation in 2022, surpassing its nuclear power plant, which fueled 22% of its electricity. Arkansas has made significant strides in integrating renewable energy sources, particularly hydropower, into its grid, contributing 8% to the state’s power grid.
9. Oklahoma
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.46
As one of the leading states in wind energy generation, Oklahoma has capitalized on its windy terrain to produce a substantial portion of its electricity, contributing to lower utility costs. The state ranked third in the country in electricity generation from wind, supplying the largest share of Oklahoma’s electricity generation at 44%.
8. Nebraska
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.43
Nebraska's electricity is provided entirely by publicly owned utilities, which operate on a not-for-profit basis. This structure allows the benefits of low-cost electricity generation, primarily from coal and wind, to be directly passed on to consumers. In 2022, Nebraska fueled 49% of its total electricity generation from coal, followed by 31% from wind and 14% from nuclear power.
7. Wyoming
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.41
As the top coal-producing state in the country, Wyoming historically sourced most of its electricity from coal-fired plants. However, recent efforts to integrate renewable energy sources, especially wind, into the grid have begun to yield results. EIA reports that wind power generation in Wyoming has almost doubled since 2019, now accounting for 22% of its electricity generation. At the beginning of this year, the state had nearly 3 gigawatts of wind power generation capacity, heralding a bright future.
6. Kentucky
Electricity Cost in Cents per Kilowatt-Hour (kWh): 12.39
Being one of the top five coal-producing states, Kentucky predominantly draws its power from coal. In 2022, approximately 68% of the state’s utility-scale electricity was generated from coal-fired plants, while natural gas was responsible for 22% of its power. Proximity to abundant coal reserves minimizes transportation costs, securing Kentucky's place among US states with cheap electricity.
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Disclosure: None. 20 States That Have The Cheapest Electricity In The US is originally published at Insider Monkey.
