Permitting Delays and Construction Costs Threaten Affordable U.S. Energy

Steven Davis argues that the United States starts from an unusually favorable position: it has some of the lowest energy prices in the Western world. That advantage supports household living standards and gives American businesses a stronger competitive position. But it is not something to assume will persist.

The immediate pressure comes from growing demand. AI investment is a prominent example: technology hyperscalers are building data centers that require large amounts of electricity. Davis also points to geopolitical disruption as a source of higher prices. The displayed material on the Strait of Hormuz frames energy security as increasingly dependent on resilient market access, secure infrastructure, and geopolitical exposure—not simply the underlying availability of fuel.

The comparative evidence Davis cites is stark. In 2024, the United States had the lowest gasoline price among the countries shown, at $3.31 per gallon including taxes. He says the average U.S. gasoline price was 20% below the global average, a direct benefit to American families.

The gap is similarly consequential for industrial energy. Since Russia’s 2022 invasion of Ukraine, Davis says, wholesale natural-gas prices in Europe and Japan have run three times above U.S. prices. That differential encourages chemical, steel, automobile, and other manufacturers to expand production in the United States.

Energy costs do depend on minerals and natural resources, Davis says, but they also depend on whether a country has the technology, ingenuity, regulations, and policy framework to exploit those resources. America’s experience with hydraulic fracturing is his central example: publicly supported research and development, private risk-taking investment, and suitable regulations made it commercially attractive to access previously difficult resources. The resulting boom expanded fuel supplies and lowered energy costs.

For much of the last two decades, Steven Davis says, electricity demand was remarkably flat across most of the country even as the economy grew. That history demonstrates that efficiency improvements can help restrain energy prices: economic output need not translate directly into proportionally higher power demand.

The underlying mix is now changing. Some baseload plants—including coal-fired and nuclear facilities—have closed for economic or environmental reasons. At the same time, the power needs of AI data centers are accelerating. In Davis’s account, the result is clear: U.S. power demand is growing more rapidly and will almost surely continue to grow for many years.

The electricity system therefore needs more than an abstract commitment to affordable power. New generating facilities, along with investment in transmission and distribution infrastructure, will be necessary both to meet demand and to limit price growth. Davis notes that power costs are already rising.

The constraint is that the United States has not achieved in construction and infrastructure the productivity gains and cost reductions seen elsewhere in the economy. Housing-construction productivity, he says, stagnated after the 1970s. For highways and mass transit, U.S. construction costs are among the world’s highest even after adjusting for wage differences.

Transit construction illustrates the scale of the problem. Davis says that, per mile, new U.S. transit projects cost two-thirds more than projects in Germany and twice as much as those in Canada. If new power plants, transmission lines, and other infrastructure must be built through the same costly system, higher demand will be more likely to translate into higher energy bills.

Davis identifies three reforms that he says would lower the cost of energy infrastructure, buildings, and other construction: eliminate tariffs on inputs, reform occupational licensing, and fix permitting and environmental review.

First, he calls for removing tariffs on lumber, steel, and building components. These measures, he argues, directly raise construction costs. The implication is straightforward: when materials cost more, every energy facility, transmission upgrade, home, and public-works project built with them becomes more expensive.

Second, Steven Davis argues for changes to occupational licensing for electricians, plumbers, HVAC workers, contractors, and related trades. He says many licensing requirements are unnecessary or not clearly related to the skills needed for the job, functioning instead as barriers to entry.

Those barriers limit the supply of workers and raise construction costs, Davis says. The state-by-state variation adds a second problem: it makes it harder and less attractive for workers to move to where construction demand is strongest. A system intended to govern trades can therefore constrain the labor supply needed to build new energy and infrastructure projects.

Third, he focuses on permitting and environmental review. Major U.S. infrastructure projects take an average of 4.5 years to complete environmental impact statements, according to Davis. Many reviews take longer still.

Time in the approval process raises financing, compliance, and other costs. It also exposes projects to completion risk from legal challenges and what Davis describes as politicized regulatory reviews. The displayed permitting-reform material warns that delays put an estimated 100 gigawatts of clean-energy projects at risk of significant delay, alongside more than $100 billion in lost investment and 150,000 fewer American jobs.

The cost is not confined to delayed projects that eventually get built. Davis stresses that some projects never happen at all: the permitting requirements, legal uncertainty, and regulatory risks can become too expensive to bear. The public then pays through more expensive buildings, costlier infrastructure, and reduced energy supply.