Why Your Electric Bill Keeps Rising in 2026 — And What Solar Still Does About It
The federal solar tax credit expired on December 31, 2025. That was a one-time hit. Your electric bill, on the other hand, goes up every single year — and the government's own forecasters say it will keep going up through 2027.
That distinction is the whole story of 2026. One is a single, well-publicized event that made solar look worse. The other is a slow, compounding increase that quietly makes every alternative look better. Most coverage of the solar credit's expiration covered the first and ignored the second.
So let's look at the actual numbers — from the Energy Information Administration's October 2026 Short-Term Energy Outlook, released October 6, 2026 — and then work through what they mean for a homeowner deciding whether to install solar now.
What electricity actually costs in 2026
The EIA publishes a national average residential electricity price in cents per kilowatthour. Here's the trajectory:
| Year | U.S. residential price (¢/kWh) | Change vs. prior year |
|---|---|---|
| 2024 (actual) | 16.5 | — |
| 2025 (actual) | 17.3 | +4.8% |
| 2026 (forecast) | 18.2 | +5.2% |
| 2027 (forecast) | 18.7 | +2.7% |
Source: EIA Short-Term Energy Outlook, October 2026.[1]
Read that again. The national average went from 16.5¢ to a forecast 18.2¢ in two years — a 10% increase. And the EIA's own numbers show that this is not a spike that reverses: 2027 is forecast higher still.
That national average also hides a lot. If you live in California, New York, or most of New England, you are paying far above 18.2¢. If you live in Texas or the Southeast, you're paying below it. The national number matters because it sets the direction of travel — but your own bill is the one that determines whether solar makes sense.
Why prices keep climbing
The EIA attributes the 2026 increase to several things, and it's worth separating them because they have different lifespans. Some are one-off events. Some are structural.
1. Weather and fuel costs (temporary)
The EIA cites "extreme weather events such as winter storm Fern and higher-than-average summer temperatures" as the primary driver of higher 2026 wholesale prices.[1] A hot summer means more air conditioning, which means more demand during the hours when the grid is already tightest.
The EIA reported that overall U.S. electricity consumption in the third quarter of 2026 was 4% higher than the same quarter a year earlier, with the largest increases coming from the residential sector (+6%) and the commercial sector (+5%).[1]
Weather-driven demand is the part that can reverse. A mild summer in 2027 would relieve some of this pressure — and indeed the EIA forecasts wholesale prices falling slightly in 2027.
2. Transmission and distribution upgrades (structural)
This is the part that does not reverse. The EIA is explicit that residential prices include costs that have nothing to do with the fuel used to generate power:
"Residential electricity prices include other expenses such as transmission and distribution upgrades, capacity market auction prices in some regions, among other expenses."[1]
Poles, wires, substations, transformers — these are capital projects financed over decades and recovered through rates. They show up on your bill whether you used more electricity or not. This is why your bill can go up in a year when you personally used less.
3. Data centers and commercial load growth (structural)
The EIA forecasts commercial-sector electricity demand — a category that includes data centers — to "increase steadily throughout 2027, growing by 2.8% year-over-year," with industrial demand up 2.7%.[1] Residential consumption, by contrast, is expected to remain "mostly unchanged from 2026 levels."
Put those two facts side by side and a pattern emerges: the load growth is coming from large commercial customers, while the transmission and generation capacity to serve it has to be built and paid for across the whole rate base. That is a structural upward pressure on the non-generation portion of your bill.
4. Wholesale price spikes in specific regions
Wholesale electricity prices across the 11 hubs the EIA tracks are forecast to average $52 per megawatthour in 2026 — 11% higher than 2025. The regional variation is dramatic:
| Region | 2026 wholesale price change vs. 2025 |
|---|---|
| PJM (Mid-Atlantic, Ohio, Illinois, etc.) | +41% — largest increase in the country |
| Northwest Mid-Columbia | −23% — largest decrease |
| ISO-NE, NYISO, PJM | Highest absolute price levels in the country |
Source: EIA STEO, October 2026.[1]
Wholesale prices are only one component of what you pay — but a 41% jump in the PJM region is the kind of number that eventually reaches residential ratepayers through capacity auctions and default service rates.
The math nobody compares: a one-time credit vs. a compounding bill
Here's the comparison that the "solar is dead" headlines missed entirely.
The Section 25D residential credit was worth 30% of your system cost. It was a one-time benefit, claimed once, on one tax return. Losing it raised the effective cost of a solar system by roughly 43% in cash-flow terms — if you were paying $30,500 for a 12 kW system, you now need to cover that full amount instead of $21,350 after credit.[2]
Your electric bill works differently. It compounds. At the EIA's forecast trajectory, a household paying the national average is looking at roughly +5% in 2026 and +2.7% in 2027, and the historical trend before that was about 3% per year over the past decade.[1][3]
Run both forward over the 25-year life of a solar system and the comparison flips. A one-time 30% discount shrinks in relative importance; a bill that grows 3–5% a year does not.
| Federal credit (expired) | Electricity price growth | |
|---|---|---|
| Nature | One-time, fixed | Recurring, compounding |
| Applies to | System cost, once | Every kWh you buy, forever |
| 25-year effect | 30% of one purchase | Multiplies the baseline you're avoiding |
| Reversible? | No — it's gone | Partly, but the structural drivers persist |
This is the honest framing. The credit's expiration made solar more expensive. Rising electricity prices made grid power more expensive too — and that second effect doesn't stop after year one.
A worked example
Let's make it concrete. Take a household using 1,000 kWh per month at the 2026 national average of 18.2¢/kWh:
- Current monthly bill (energy portion): 1,000 × $0.182 = $182
- Annual energy cost: $2,184
Now suppose they install an 8 kW system. Using the national average of $2.58 per watt tracked by EnergySage — the same figure we use in our 2026 cost guide — that's about $20,640 before any state or utility incentives.[2]
An 8 kW system in a moderately sunny state produces roughly 11,000–12,000 kWh per year. If it offsets 90% of that household's usage, it avoids about 10,800 kWh of purchases:
| Year 1 savings | 10,800 kWh × $0.182 = $1,966 |
|---|---|
| Simple payback (no credit, no rate escalation): $20,640 ÷ $1,966 ≈ 10.5 years | |
| Same system with a 30% credit (2025 rules): $14,448 ÷ $1,966 ≈ 7.3 years | |
So the credit's expiration pushed simple payback from about 7.3 years to about 10.5 years on these assumptions. That's a real difference — and it's why 2026 quotes look worse than 2025 quotes for the same equipment.
But now add rate escalation. If electricity prices rise 3% per year — below the 2026 forecast increase — the cumulative avoided cost over 25 years is dramatically higher than the flat-rate version, because you're avoiding a moving target:
| Scenario | Cumulative 25-yr avoided cost |
|---|---|
| Flat rate at 18.2¢ (no escalation) | ~$49,150 |
| Rate escalating 3%/yr from 18.2¢ | ~$71,600 |
| Rate escalating 5%/yr from 18.2¢ | ~$93,900 |
Illustrative calculation on the assumptions above; actual results vary by state, utility, system production, and net metering rules.
Against a $20,640 system cost, even the flat-rate case clears the investment over 25 years. The escalating cases clear it by a wide margin. The point is not that solar always wins — it's that the credit's expiration is a fixed, known quantity, while the electricity price you're avoiding is neither.
Who this changes the answer for
None of this is uniform. The same 2026 policy change lands very differently depending on where you live:
| Your situation | How 2026 changed it |
|---|---|
| High-rate state (CA, NY, New England, 24–35¢/kWh) | Least affected by the credit loss. High avoided cost does the heavy lifting, and every future rate increase helps your case. |
| Mid-rate state (national average, ~18¢) | Payback stretched, but still viable over a 25-year horizon — especially if you plan to stay in the home. |
| Low-rate state (TX, Southeast, 12–16¢) | Most affected. Without the credit and with cheap grid power, payback is long. Consider financing structure carefully — see our PPA vs. lease vs. buy comparison. |
| Planning to sell within 5 years | Weaker case — the payback period may outlast your ownership. See what solar does to home value. |
| High usage household (above 1,000 kWh/mo) | Stronger case — you're paying the highest tiers of your rate schedule, and solar offsets those first. See how to read your bill. |
What to actually do about it
If your bill is climbing and you're trying to decide how to respond, the sequence matters more than any single tactic.
1. Get 12 months of usage data before anything else
Your utility can usually provide a usage history report at no cost. You need your annual kWh, your rate structure, and your seasonal pattern. Without these, any solar quote you get is guesswork — and a usage estimate based on appliance assumptions is a starting point, not a substitute.
2. Check whether you're on the right rate schedule
Many utilities offer time-of-use plans where power is cheaper overnight and much more expensive from late afternoon into the evening. If your usage is flexible — EV charging, laundry, dishwashing — a TOU plan can cut your bill without any hardware. If it isn't flexible, TOU can raise your bill. Read the schedule before switching.
3. Cut what you can with efficiency first
Efficiency measures are cheaper than generation and reduce the size of system you need. LED conversion, duct sealing, and a heat pump water heater are the usual high-return items. Every kWh you don't use is a kWh you don't have to buy or generate.
4. Then evaluate solar and storage against your real numbers
With your actual usage and rate in hand, you can compare options honestly. Our solar savings calculator uses your state's electricity price and solar production data to estimate payback — and because the input rate is adjustable, you can test what happens if your utility raises rates again.
If you're considering a battery as well, note that the federal treatment of storage in 2026 is genuinely different from solar's — we break down exactly why in our guide to the 2026 battery credit.
Frequently asked questions
Will electricity prices come back down?
Partly, in some regions. The EIA forecasts wholesale prices falling slightly in 2027, from $52 to $49 per megawatthour, as weather returns to normal.[1] But residential prices are forecast to keep rising — 18.2¢ in 2026 to 18.7¢ in 2027 — because the non-generation components (transmission, distribution, capacity) don't move with the weather. A one-year dip in wholesale prices does not reverse a decade of rate-base growth.
Are data centers the reason my bill is going up?
They're a contributing factor, not the whole story. The EIA forecasts commercial demand — a category that includes data centers — growing 2.8% year over year into 2027.[1] But the bigger 2026 driver was weather: winter storm Fern and a hot summer pushed consumption up 4% nationally. The honest answer is that load growth from large customers adds structural pressure on top of weather-driven volatility, and both end up in the rate base.
With the federal credit gone, is solar still worth it?
It depends on your electricity rate and how long you'll stay in the home. At 18.2¢/kWh — the 2026 national average — a typical system's simple payback stretches to roughly 10–11 years without the credit, versus about 7 years with it. Over a 25-year horizon, with rates rising at the EIA's forecast trajectory, the investment still clears for most mid-to-high-rate households. In a 12¢/kWh state with a 5-year ownership horizon, it often doesn't. Run your own numbers rather than trusting a national average.
Should I wait for prices to drop or the credit to return?
Equipment prices have been falling gradually for years, but there is no law currently restoring the Section 25D residential credit.[4] Meanwhile, every year you wait, you pay another year of rising retail electricity. Waiting has a cost that doesn't appear on any quote.
Does leasing or a PPA change this?
Yes — significantly. Because a third-party owner can still claim the commercial credit under Section 48E, a lease or PPA is now the only structure where federal credit value still reaches a residential roof. But whether that value actually shows up in your monthly payment depends on the contract, and the storage portion is treated differently from the solar portion. We cover the mechanics in the 2026 battery credit guide and the economics in PPA vs. lease vs. buy.
The bottom line
Two things happened to solar economics in 2026, and only one of them got headlines.
The federal residential credit expired, which raised the effective cost of a homeowner-owned system by roughly 30%. That's real, and it's permanent under current law.
At the same time, the EIA forecasts residential electricity prices rising from 17.3¢ to 18.2¢ to 18.7¢ across 2025–2027, on top of a decade of roughly 3% annual increases.[1][3] That's also real, and it's the number that keeps moving against you.
Solar is a bet on the second number. The question worth asking isn't "is solar still worth it?" — it's "how much higher do I think my electricity rate will be in 10 years, and what do I want to do about it?"
If you want to see what the answer looks like for your address, run your numbers through the calculator.
Sources
- U.S. Energy Information Administration, Short-Term Energy Outlook, released October 6, 2026 — residential electricity price, wholesale price, consumption, and demand forecasts. eia.gov/outlooks/steo/
- EnergySage national average installed cost data ($2.58/watt), as cited in our 2026 solar cost guide. energysage.com
- EIA historical residential electricity price series (Electric Power Monthly), national annual averages. eia.gov/electricity/monthly/
- One Big Beautiful Bill Act, Public Law 119-21 (enacted July 4, 2025) — termination of the Section 25D Residential Clean Energy Credit for property placed in service after December 31, 2025.