Electricity pricing can vary widely within a single state or even by region within a state. Electricity rates depend on several factors, including the cost of electric power production, government incentives or taxes, local weather patterns and transmission and distribution infrastructure, among others. For instance, in some parts of the Midwest and upper South Central states, there are substantial differences between wholesale electricity prices and retail prices paid by consumers. Consumers living in these areas pay much less than consumers in other parts of the country for the same amount of electricity. How is this difference made?
the infrastructure for electricity generation and transmission
One reason why certain areas of the country are able to obtain cheap electricity is because the infrastructure for electricity generation and transmission and distribution is not as developed as other parts of the country. There are many power plants that operate only for a few hours each day, making them less of a reliable source of energy. However, there are many power plants that produce electricity throughout the night or all day long. This reliability allows these areas to obtain a consistent flow of electricity without any fluctuations.
the frequency with which certain types of energy are produced or used
Another factor affecting the time-variant electricity pricing is the frequency with which certain types of energy are produced or used. If there are several power plants operating at the same time, the cost of electricity rises drastically over time. On the other hand, if the area is divided into several zones with different types of energy production, the peak power consumption occurs at different times of the day. The result is that during midday there is minimal demand for electricity, but when the sun sets the electrical load suddenly increases. To prevent drastic spikes in electricity use, time-variant electricity pricing is used to charge customers based on the time of day that they use power.
the presence of intermittent power sources
As discussed earlier, there are many reasons why electricity costs vary by location. Some of these reasons include the presence of intermittent power sources such as wind and solar power, and geography. Other factors, however, are not related to these sources and have much to do with changing consumer behavior. For example, poor air quality, high traffic, and industrial activity can all increase the amount of carbon emissions released into the atmosphere, which affects the cost of electricity.
the supply of oil and natural gas
Changes in the supply of oil and natural gas have also led to dramatic increases in electricity prices over the past several years. One of the primary reasons that electricity prices have fluctuated in recent years has been the high demand for natural gas and electricity. High demand both in the residential and commercial markets has led to an increase in the installation of natural gas and electricity-powered heating and cooling systems. In addition, the increasing cost of natural gas and coal has made electricity more expensive.
alternative energy sources to meet their energy needs
High electricity costs have also resulted in increases in the number of people who are turning to alternative energy sources to meet their energy needs. As the costs of traditional electricity generation continue to rise, more people are choosing to generate their own electricity from solar power and wind turbine systems. Although these systems do require a bit of initial investment, they can help reduce electricity costs and allow you to control your own energy consumption. With so many changes taking place in the way utilities are regulated, it is likely that electricity prices will continue to increase for the foreseeable future. To minimize your impact on the environment, you should consider all of your alternatives and make an informed decision about where you live.