Electricity is considered as a vital discovery of science. It enables men in production of goods as well as in transportation. The price of electricity varies due to many reasons. It’s important to know what affects electricity prices as we can evaluate the reason and rectify the same to make electricity consumption cost effective and affordable.
Factors affecting electricity price
The factor that usually affects electricity price depend upon the cost to build, maintain, finance and operate power plants and the electricity grid which is considered as the most complex system of power distribution and transmission. To know about what affects electricity prices, certain factors need to be considered are:
- Power plants- Each power plant involves separate maintenance, operating and construction cost which are to be considered.
- Regulations- In certain places, electronic prices are completely regulated by Public Service Commission’s whereas in some other there is combination of regulated and unregulated prices.
- Weather conditions- For low cost hydropower generation, a good source of water can be rain and snow. When temperature increases the need of cooling, electricity is needed.
- Transmission and distribution system- the system of maintenance and distribution of electricity also involves certain electricity cost.
Price of electricity is usually hiked during the hot days of summer season. When electricity demands are varying, changes in rate are noticed. Another feature affecting electricity prices are availability of different fuels, power plants and others. Usually the prices are highest during the summer season as the demand for certain electronic cooling devices are high for beating the extreme heat.
The price for electricity is normally high for any residential and any commercial consumers as the process of distributing electricity to these people costs more. Any industrial consumers use greater amount of electricity and receives more voltages. Hence supplying electricity to these people are much easy and also less expensive.
Electricity prices vary with different localities. Different locality uses electricity from different power plants, fuels and pricing regulations. The local fuel costs also vary with this.
Energy intensity is another factor that is determined for higher electricity rate. The electricity rate becomes higher in an advanced industrialized place.
Some of the external factors that play key role for higher electricity rate include sudden change in weather like a strong storm making electricity consumption absolutely high. Any market fluctuation of fuel will also affect electricity price.
Higher demand increases price
In times of high demand of electricity when there is excess supply, a hike in the price of electricity may occur. Simultaneously, when supply exceeds demand there is an increase in the price of electricity. To store electricity is highly recommended. Usually the electricity produced is consumed and which isn’t consumed is either stored for future use or it is supplied to areas which have irregular supply or deprived of proper electricity as it should be. Living in a place with varied weather conditions, the demand of electricity can be considered high during summer days. This is the period when electricity price is usually higher. The more power is consumed, the more increase in price will be noticed. Thus, whenever the system fails to meet high demand of electricity, there is a chance in the rate hiking above the average price. Hence, as an answer to the most commonly asked question; what affects electricity prices, the above mentioned factors must be considered.