When a facility turns on a machine, runs its HVAC system, or turns on lights, electricity arrives at the building through the electric grid. But where does that electricity actually come from?
Electricity can be generated from a variety of energy sources, including natural gas, coal, nuclear power, wind, solar, hydropower, biomass, and geothermal energy. The mix of these resources changes by region, season, weather conditions, and market conditions.
Understanding the different sources of electricity can help businesses better understand the energy market—and why electricity prices can change over time.
The U.S. Electricity Generation Mix
The United States has a diverse electricity-generation system. According to the U.S. Energy Information Administration (EIA), utility-scale power plants generated approximately 4.43 trillion kilowatt-hours of electricity in 2025.
The largest sources of U.S. electricity generation are:
- Natural gas: approximately 41%
- Renewable energy: approximately 24%
- Nuclear: approximately 18%
- Coal: approximately 17%
- Other: less than 1%
Renewable generation includes wind, solar, hydropower, biomass, and geothermal energy. But what does each source contribute to the electricity market?
Natural Gas
Natural gas is currently the largest source of electricity generation in the United States, accounting for approximately 41% of utility-scale generation in 2025. Natural gas power plants generally use two technologies:
Natural gas turbines burn gas to create hot combustion gases that spin a turbine and generate electricity.
Combined-cycle power plants use the heat from the gas turbine’s exhaust to create steam, which powers a second turbine. This allows the plant to produce additional electricity from the same fuel.
Natural gas plants are particularly valuable to the electric grid because many can adjust their generation relatively quickly as electricity demand changes. Natural gas prices can also have a significant impact on electricity prices because natural gas-fired generators are frequently used to meet electricity demand.
For businesses, this means changes in the natural gas market can ultimately influence wholesale electricity prices.
Coal
Coal has historically played a major role in U.S. electricity generation. While its share has declined significantly over the past several decades, coal still accounted for approximately 17% of U.S. utility-scale electricity generation in 2025.
Coal-fired power plants typically burn coal to heat water and produce steam. The steam spins a turbine connected to a generator, producing electricity. Pennsylvania has the most coal power plants, followed by Indiana and Texas.
Coal plants can provide large amounts of electricity for extended periods, but they generally take longer to start up or change their output than many natural gas plants.
Coal generation has declined as natural gas and renewable generation have expanded. Coal represented approximately 52% of U.S. electricity generation in 1990, compared with about 17% in 2025.
Nuclear Energy
Nuclear power accounted for approximately 18% of U.S. utility-scale electricity generation in 2025. Nuclear plants generate electricity through nuclear fission. In simple terms, nuclear fuel produces heat, which is used to create steam. That steam spins a turbine connected to an electrical generator.
Nuclear plants are capable of producing large amounts of electricity consistently and are an important source of reliable generation for the electric grid. Unlike fossil-fuel generation, nuclear power plants do not burn coal or natural gas to produce electricity.
Because nuclear facilities can operate for long periods and provide consistent generation, they can play an important role in meeting the grid’s ongoing electricity demand. Currently the United States have 57 nuclear power plants in 28 states.
Wind Energy
Wind is one of the largest renewable sources of electricity in the United States. Most Wind generation is in the middle of the country. Over half of the generation comes from Texas, Iowa, Oklahoma, Kansas and Illinois. Wind turbines convert the movement of air into mechanical energy, which drives a generator to produce electricity.
In 2025, wind provided approximately 11% of U.S. utility-scale electricity generation, making it one of the country’s largest individual sources of electricity.
Wind generation does not require fuel to operate, meaning its generation costs are not directly tied to the price of a fuel commodity.
However, wind generation depends on weather conditions. Electricity production can increase when wind speeds are favorable and decrease when wind conditions weaken. These wind speeds can vary season to season throughout the year in different parts of the United States. This variability is one reason the electric grid requires a diverse mix of generation resources.
Solar Energy
Solar Energy has seen increased substantially over the last two decades. Solar accounted for approximately 7% of U.S. utility-scale electricity generation in 2025. The United States is the second largest producer of solar electricity in the world. The state of California leads in the largest percent of solar generation, followed by Texas.
Solar power converts sunlight into electricity. The most common technology is photovoltaic, or PV, panels. Solar PV systems convert sunlight directly into electricity without using a traditional turbine.
Solar generation has also expanded beyond large utility-scale power plants. Businesses, homeowners, and other organizations can install smaller solar systems directly at or near their facilities.
Solar can provide businesses with an additional source of electricity and may reduce the amount of electricity purchased from the grid. For commercial and industrial customers, solar can be particularly attractive when combined with other energy-management strategies.
Businesses can also explore options such as community solar, which can provide access to renewable energy without requiring a solar installation directly on the facility.
Hydropower
Hydropower uses the movement of water to generate electricity. This source of power depends on precipitation and can vary seasonally. Hydropower provided approximately 6% of U.S. utility-scale electricity generation in 2025. Washington, California and Oregon make up half of utility scale conventional capacity.
Most conventional hydroelectric plants use water stored in a reservoir or flowing through a river system. The moving water turns a turbine, which drives a generator. Approxmi 18 states generated cpcapotu with pumed storage.
Hydropower is a renewable source of electricity and can provide relatively consistent generation in regions with suitable water resources. Some hydroelectric facilities can also adjust their generation based on grid needs, making certain types of hydropower valuable for balancing electricity supply and demand.
Other Energy Sources
A small portion of U.S. electricity generation comes from other sources, including biomass and geothermal energy.
Biomass electricity is generated using organic materials such as wood products, agricultural waste, landfill gas, and other biological materials. Biomass can be burned to create steam or converted into a gas that can be used to generate electricity.
Geothermal power uses heat from beneath the Earth’s surface to generate electricity. In many geothermal plants, underground heat produces steam that is used to turn a turbine and generate electricity.
While biomass and geothermal represent a relatively small portion of total U.S. electricity generation, they contribute additional diversity to the nation’s energy mix.
Why Electricity Sources Matter to Your Business
For businesses, understanding electricity generation is more than an educational exercise. The resources used to generate electricity can influence wholesale electricity prices, market volatility, environmental considerations, and long-term energy planning.
For example, natural gas prices can influence the cost of electricity generated by gas-fired power plants. Weather can affect both electricity demand and renewable generation. Transmission constraints can affect which generators are able to serve a particular area.
These factors all contribute to the electricity prices businesses see in competitive energy markets.
This is why energy procurement should not simply be about finding a rate. Businesses can benefit from understanding the market conditions behind that rate and evaluating how different energy strategies fit their operations.
What Should Businesses Consider?
When evaluating their electricity strategy, commercial and industrial customers should consider more than their current electricity rate.
Important questions include:
- How much electricity does the facility use?
- When does the facility use the most electricity?
- Is the business located in a competitive electricity market?
- How much price volatility can the business tolerate?
- Would a fixed-rate or market-based procurement strategy make sense?
- Could solar or community solar provide additional value?
- Can demand response reduce electricity costs?
- Are there energy-efficiency projects that could lower consumption?
- How might changing market conditions affect future electricity costs?
A comprehensive energy strategy can combine electricity procurement, energy efficiency, renewable energy, demand response, and other energy-management solutions.
The Bottom Line
Electricity comes from a diverse combination of resources, and that mix continues to evolve. Natural gas remains the largest source of U.S. electricity generation, while nuclear power continues to provide significant consistent generation and renewable resources such as wind and solar continue to expand.
For businesses, the important takeaway is that the electricity market is interconnected. Fuel prices, weather, generation availability, demand, transmission constraints, and renewable production can all influence the cost of electricity.
Understanding where electricity comes from is the first step toward understanding the market—and making better energy decisions. Want to better understand your company’s energy options? Contact QFB Energy to start the conversation.
