US Electricity Prices Soar: Wholesale Costs and Transmission Bottlenecks

Since 2020, US electricity prices have skyrocketed by 35%. This article delves into trends in wholesale electricity prices, finding that the increase is linked to both generation costs and transmission bottlenecks. Independent System Operators (ISOs)/Regional Transmission Organizations (RTOs) manage electricity markets using Location Marginal Pricing (LMP), composed of energy, congestion, and losses. Analyzing LMP data across various ISOs/RTOs reveals a significant surge in wholesale electricity prices since 2020, partly due to rising natural gas prices. However, transmission bottlenecks are increasingly significant, hindering the movement of inexpensive electricity from low-cost areas to high-demand regions, amplifying price volatility. California's solar power growth and natural gas supply shortages in certain areas exacerbate transmission congestion.