Utility Rates in 2026: Why They're Rising and Solar's Role

Electricity got more expensive again this year. The federal solar credit got smaller for most buyers. Those two facts pull in opposite directions, and sorting out why is the key to whether solar still makes sense for you. TL;DR: U.S. residential electricity rates reached a national average of about 17.45 cents per kWh in early 2026, up roughly 9.5% from a year earlier, according to the Energy Information Administration (EIA). Those increases come from grid spending, fuel costs, and rising demand, not from the expired tax credit. But because rates keep climbing, the case for generating your own power hasn't weakened. The financing behind it has just changed. How much rates have actually risen The EIA put the national average residential rate at roughly 17.45 cents per kWh in January 2026, up about 9.5% from the same month a year before. For a typical household that works out to around an extra $150 a year for using the same amount of power. The national average also hides a huge spread. Some states sit comfortably below 13 cents per kWh, while California runs above 30 cents and Hawaii higher still. Several markets posted double digit percentage jumps in a single year. Where you live sets your baseline, and for most of the country that baseline went up again in 2026. Why rates keep going up These increases aren't a one year blip. Utilities are partway through a long, expensive infrastructure cycle, with planned grid investment running into the hundreds of billions over the second half of this decade. That money covers aging equipment, wildfire and storm hardening, and new connections. On top of that, fuel prices feed straight into generation costs, natural gas in particular, and electricity demand is climbing fast, partly from data centers and new manufacturing. Regulators recover those costs from customers over time through approved rate increases. None of it reverses quickly. Did the expired tax credit push rates up? Short answer: no. The Section 25D residential solar credit expiring at the end of 2025 didn't raise your utility bill. Rates rise for the structural reasons above: grid investment, fuel, and demand. The credit going away changed the economics of going solar, not the price of grid power. What the two trends share is timing. Homeowners are looking at a pricier grid and a different solar incentive landscape in the same season, and it's easy to blur them together. They're separate forces. The grid keeps getting more expensive on its own schedule, and solar is one of the few tools a homeowner has to step partway off that schedule. Why rising rates drive the solar decision A tax credit is a one time event. A utility rate is a number you pay every month, and it has moved in one direction for years. That's why, even with the direct federal credit gone for purchases, the basic logic of solar still holds for a lot of households: generate some of your own power instead of buying all of it at a rate you don't control. Solar doesn't guarantee a fixed bill or a specific savings figure. Your results depend on your roof, your usage, your rate plan, and your financing terms. But when grid rates climb 5 to 10% a year, the value of the power you make yourself rises right along with them. That's the part of the equation rate hikes actually strengthen. What to compare now Because the federal picture shifted, the smart comparison in 2026 leans less on "what's my tax credit" and more on "how does each option perform against my actual utility rate over time." When you line quotes up side by side, look at your current rate next to your utility's recent history of increases, and check whether a lease or PPA passes commercial credit value through to lower your cost (the system owner can claim the Section 48E credit through the end of 2027). Read the financing terms closely too: the interest rate, any payment escalators, and what happens if you sell the home. Equipment tier and warranty matter more now that the math is tighter. Any claim about how a system performs against your specific bill should be checked against real quotes for your address, not a generic estimate. The grid's direction is mostly out of your hands. What you can control is how many installers compete for your project before you decide.