Pennsylvania has an energy problem — and it has nothing to do with what’s in the ground.

The commonwealth is an energy powerhouse by almost any measure. Pennsylvania exports 89 million megawatt-hours of electricity per year, making it the nation’s leading electricity exporter. The Keystone State also ranks among the nation’s top producers of natural gas, nuclear power, and coal, powering and heating American homes and businesses nationwide.

Yet Pennsylvanians pay more for electricity. A new report from the Joint Economic Committee finds that the average Pennsylvanian paid $210 more annually–a 12 percent increase from last year alone. The Independent Fiscal Office found that residential Pennsylvanians pay 45 percent more per kilowatt hour than they did in 2018.

So, why do Pennsylvanians pay more despite their proximity to such energy abundance?

Many want to blame utility companies and artificial intelligence (AI), but such criticisms are misplaced and let the real culprit off the hook.

Ultimately, bad state policies have discouraged investment in reliable, affordable energy in Pennsylvania while subsidizing alternatives that can’t keep the lights on during blizzards or heat waves.

Pennsylvania energy problems predate the AI boom. Between 2019 and 2024, developers proposed 38 percent less new generation capacity in Pennsylvania than the preceding six-year period, 2013 to 2018. Meanwhile, proposals in Ohio surged by 33 percent, according to federal data. Pennsylvania built fewer plants when electricity demand spiked.

At roughly the same time, many of Pennsylvania’s neighbors (with the notable exception of Ohio) also implemented bad statewide policies and continued to shut down reliable generation. Between 2018 and 2023, New York, New Jersey, and Maryland all shuttered power plants, taking a combined 27 million megawatt-hours offline.

It’s no coincidence the drop in new Pennsylvania power plants coincides with our six-year flirtation with the Regional Greenhouse Gas Initiative (RGGI). RGGI, the cap-and-trade scheme that would have imposed a new carbon tax, scared away investors who weren’t bullish on Pennsylvania’s regulatory uncertainty.

There’s also Pennsylvania’s Alternative Energy Portfolio Standards (AEPS). AEPS mandates that 18 percent of utility power purchases originate from less-reliable sources, such as wind, solar, and hydroelectric. That mandate costs Pennsylvania ratepayers about $700 million per year–not as a tax, but as a hidden premium embedded in every electric bill. In fact, these hidden costs have grown by a stunning 637 percent since 2015.

To make matters worse, Gov. Josh Shapiro wants to double down on carbon taxes. His so-called “Lightning Plan” includes a state-only version of RGGI, known as the Pennsylvania Climate Emissions Reduction Act (PACER). He has also proposed the Pennsylvania Reliable Energy Sustainability Standard (PRESS), which dramatically expands the renewable mandate to 35 percent, with an additional 15 percent requirement for loosely defined “low-carbon” sources. Combined, PACER and PRESS will double electricity bills over a decade.

And this doesn’t even begin to address the regulatory red tape that developers face. Local permitting often presents unclear timelines and expectations. And despite efforts to fast-track statewide permitting, only a small sample of selected projectsqualifies for expedited approvals.

Pennsylvania permitting is behind the curve nationally. Some states, such as Texas, measure their approval process in months, rather than years. Last August, Pacifico Energy began seeking approval for its GW Ranch, a self-sustaining 8,000-acre data center campus with almost 8 gigawatts of gas-fired generation. The Texas Commission on Environmental Quality approved the project five months later.

But Pennsylvania’s energy woes aren’t a foregone conclusion.

We can reverse rising rates by putting the carbon tax debate to rest once and for all. Schemes like RGGI cost millions, increase carbon emissions throughout the region, and chase away the investment Pennsylvania needs. PACER won’t be any better.

Pennsylvania must also abandon its excessive renewable mandates. AEPS has artificially inflated the energy costs, raking in millions in subsidies for politically preferred energy projects and forcing Pennsylvanians to foot the bill. PRESS will only make things worse.

Finally, the commonwealth must fix its broken permitting system. And we cannot do this with selective criteria; only systemic, universal reforms can provide developers with a clear, consistent, and timely pathway to approval. Permitting must be measured in months, not years.

Pennsylvania once fueled the first Industrial Revolution. Now, the commonwealth–with its abundance of resources, infrastructure, and workforce–is uniquely positioned not only to power the AI boom but also to generate more affordable energy for families and businesses.

All we need to do is get out of our own way.

Elizabeth Stelle is the vice president of policy of the Commonwealth Foundation, Pennsylvania’s free-market think tank.