Electrification Can Lower Energy Bills, but Only if We Do it Right

More and more of the energy that powers daily life is shifting to electricity. Commuters are replacing gas-powered cars and scooters with electric vehicles. Households are changing out gas appliances for heat pumps and electric stoves. Cities are swapping diesel-fueled buses for electrified fleets.

The UN climate summit in Antalya, Turkey (COP31) aims to accelerate the shift, urging countries to adopt a pledge to supply 35% of global final energy consumption with electricity by 2035, up from around 23% today. But how quickly the world moves toward electrification hinges on a key question: Will it actually lower rising energy bills?

The Promise of Electrification

Households need affordable heating, cooling, cooking and mobility. Industry needs competitive, reliable power to invest, create jobs and replace fossil fuels. Governments need energy systems that support growth, expand access and strengthen energy security while delivering on climate commitments.

Dramatic falls in solar, wind and battery costs have created an extraordinary opportunity to meet those needs while also reducing emissions and exposure to volatile fossil-fuel prices. Yet an awkward question persists: If renewables are so cheap, why is electricity still expensive in so many places?

The answer is that cheaper technology is just one piece of the puzzle. Countries will need to build, operate, finance and price their electricity systems so that lower costs translate into affordable energy bills for people. If upfront costs put electric products out of reach — or promised savings fail to materialize — political ambition will struggle to sustain public backing, putting the entire shift to electrification in jeopardy.

Five priorities can help governments, regulators and industry turn electrification into savings:

1) Make the switch to electricity affordable upfront.

Governments and finance providers should help households and businesses afford investments that lower energy costs over time. For the user, the decisive question is how much it costs to get the job done.

Take home heating. Electricity can deliver cheaper warmth even when it costs more per unit than gas. A heat pump moves heat rather than generating it by burning fuel, delivering three to four units of heat for every unit of electricity purchased — an effective efficiency of 300-400%. Even at the lower end of that range, a heat pump uses 70% less purchased energy than a modern gas boiler operating at 90% efficiency. That efficiency advantage means that even if electricity costs three times as much per unit as gas, the energy cost of heating is still 10% lower. In other words, a higher electricity bill need not mean higher total energy costs. A household replacing a petrol car or gas boiler buys more electricity, but far less petrol or gas.

The same is true for mobility. In India, a 2025 analysis by the Council on Energy, Environment and Water estimated that electric two-wheelers cost around 40% less to own and operate per kilometer than petrol models.

However, lower lifetime costs do not remove the upfront barrier. Equipment and installation can make switching unaffordable even where electric products would save money over their lifetime. In Britain, for example, an air-source heat pump installation costs around £12,000 ($16,000) before grants, compared with roughly £3,700 ($5,000) for a replacement gas boiler, including installation. An investment that saves money over 10 years is of little use to a family that can’t afford the sticker price this year.

Affordable loans, leasing and targeted support can help. In England and Wales, for example, eligible homeowners replacing gas heating can receive £7,500 ($10,000) towards a heat pump through the Boiler Upgrade Scheme until March 2027. Practical barriers also need addressing, including  charging availability, connection costs and, for renters, permission to install equipment.

2) Reduce the financing costs for clean power.

Making the switch affordable also depends on the cost of supplying electricity. Governments and financial institutions should lower financing costs for clean generation so that cheaper technologies can deliver cheaper power.

Few energy technologies have undergone a cost transformation comparable to solar. Between 2010 and 2025, the global average lifetime cost per unit of electricity from new utility-scale solar fell by a staggering 89%. Over the same period, onshore wind costs fell 71%; offshore wind by 63%. The installed cost per unit of storage capacity for four-hour utility-scale batteries, meanwhile, dropped by 95%, including by almost 30% in 2025 alone.

These cost reductions have rewritten the economics of generating and storing electricity, putting clean power at the heart of the opportunity to build more affordable, secure energy systems.

Wind and solar also offer a crucial advantage over fossil fuels: They eliminate exposure to ongoing fuel costs that can be volatile and affected by geopolitics. Maintenance and financing still cost money, but the fuel bill stays at zero.

The value of escaping fossil fuel bills comes into sharper focus with every energy crisis. The IEA counted 13 major oil-price shocks between 1973 and 2024 — roughly one every four years. When “shocks” recur this often, we need to stop being surprised by them and recognize them for what they are: structural features of continued fossil-fuel dependence. This year’s Hormuz crisis cut global oil supply by roughly a tenth in a single month, amid what the IEA described as the largest disruption in the history of the oil market.

These crises force families to cut back on essentials, put jobs and livelihoods at risk, and pile emergency relief costs onto already stretched public finances, leaving governments with less to spend on the services people depend upon.

Investing in clean power can reduce that recurring economic vulnerability, but we need affordable finance to harness the benefits of clean power.

Much of the lifetime cost of wind and solar lies in building them, while fossil-fuel plants require continuing fuel purchases throughout their operation. The cost of financing that upfront investment therefore has a major influence on how cheaply they can generate electricity; clean power is more sensitive to financing costs because of this upfront investment. Currency risk, unstable policy and uncertainty over utility payments can make excellent renewable resources expensive to develop. This is particularly true in developing and emerging economies, where financing costs tend to be higher than in advanced economies.

Governments can lower financing costs through predictable rules, credible contracts and reliable payments to generators. Development banks can help with guarantees against non-payment, support for managing currency risk and concessional loans. Cheaper capital is therefore an affordability measure in its own right: It can mean cheaper power.

3) Prevent avoidable costs before they are locked in.

WRI’s strategic electrification work through the Clean Energy Ministerial’s 21^st Century Power Partnership highlights a central choice. New demand can become either a grid constraint or a flexible resource, depending on how it is planned and managed.

Imagine 100 electric buses returning to a depot for an overnight recharge. They need to be ready for the morning route. Charging them all at full power the moment they arrive is one option, but it would create a much higher peak in power demand, potentially requiring costly grid upgrades. A better way would be to use software that can spread charging across buses’ parking window, reducing the maximum power the depot draws from the grid. Where local grid conditions allow, that can defer or avoid costly upgrades without taking a single bus out of service. With vehicle-to-grid technology, those same buses can even supply electricity back to the grid at peak times.

Electrification adds demand, but well-planned, flexible demand can put spare grid capacity and abundant renewable power to work. Spreading infrastructure costs across more consumption can then lower the average cost of each unit of electricity delivered.

Governments, utilities and major electricity users should plan supply and demand together, before sites, equipment and connections are fixed. Where demand is growing, designing new buildings, transport systems and industry for efficient, flexible electrification from the outset can avoid costly retrofits later.

4) Reward lower system costs.

In many regulatory systems, utilities earn returns on investment in physical infrastructure, but have weaker — if any — incentives to pay for services that could avoid new construction. That can favor building more infrastructure even when other options would serve users more cheaply and efficiently. Regulators should give utilities incentives and procurement tools to assess new infrastructure, storage, flexible demand and better use of existing grids on equal terms, choosing the combination that delivers reliable service at the lowest total system cost.

The potential savings are substantial. Centre for Net Zero modelling suggests that flexible electric-vehicle charging and home heating could reduce Britain’s annual electricity-system costs by £5 billion ($6.7 billion) by 2035, compared with a scenario without that household flexibility. In the US, Brattle estimates that better use of existing electricity infrastructure, including strategically locating new demand, improving efficiency and reducing peaks, could save consumers over $100 billion over the next decade.

Realizing these savings also requires flexibility that operators can count on. Households and businesses providing flexibility — for example, by adjusting vehicle charging or heating — need fair compensation and control over how their equipment is used, backed by investment in the equipment and market arrangements that make participation both reliable and attractive.

Countries will still need substantial new infrastructure, developed with consideration for communities and care for nature. The aim is to ensure that new construction and alternatives compete on their ability to meet people’s electricity needs reliably and affordably.

5) Carry savings through into prices.

Even when clean power is cheap to produce, those savings don’t always show up on bills. Two challenges stand in the way.

The first is pricing practices. For example, in Britain’s wholesale auctions, generators offer electricity at different prices. Wind and solar can bid low because they need no fuel. Gas plants must cover fuel costs, which fluctuate with international markets. Under marginal pricing models, the last — and most expensive — offer accepted to meet demand sets the price paid to all successful generators in that auction. When that offer comes from a gas plant, gas prices influence even what cheaper generators receive.

The second challenge is that electricity bills pay for far more than power production. Embedded in the cost are grid networks, policy commitments, payments under existing contracts and more. Bills can therefore still rise despite cheaper new renewables if other costs increase faster. How those costs are shared between households, industry and public budgets, however, is a policy choice.

Long-term contracts can secure electricity at agreed prices, reducing buyers’ exposure to volatile wholesale markets. Governments and regulators should enable these arrangements and ensure that lower clean-power purchasing costs are reflected in the electricity prices charged to households and businesses.

India demonstrates how procurement can turn renewable cost advantages into industrial savings. Its open-access arrangements allow eligible businesses to contract with renewable generators and pay to use the public grid, rather than buying all their electricity from the local distribution utility. Ember estimates potential savings of ₹1–4 per kilowatt-hour (roughly $0.01-$0.04) compared with utility supply, after applicable charges and depending on the state.

Turning Electrification into Lasting Benefits

The credibility of the “35x35” pledge will depend on whether governments, regulators and utilities turn these priorities into changes people can see beyond the halls of Antalya. Success means families with more to spend on essentials, businesses with greater confidence to invest and create jobs, and countries less exposed to the next fuel crisis.

That is how electrification earns lasting public support: by making people’s lives better.