How Electricity Prices Are Set to Drop in the Future

how electricity is created, purchased, and delivered

It’s important to understand how electricity prices work in order to successfully manage your home’s electricity usage. With a basic understanding of how electricity is created, purchased, and delivered, you will be in a better position to make informed choices about which appliances should be used, how much, and when. Understanding how these prices are determined can also help you make an easy monthly payment when needed. Knowing the basics about how electricity is priced is also helpful in understanding where savings can be made on your utility bills. With this information, you will be able to use this pricing information to determine whether there are any price fluctuations that may be beneficial to you.

It’s projected that the national residential electricity price in the United States is set to increase by 1.3% between 2021. In general, current retail electricity rates in the country haven’t increased by that much during this time. This trend is expected to continue even as natural gas prices are expected to increase, increasing electricity costs across the country. To learn more about the causes of wholesale natural gas prices, as well as the impact of wholesale natural gas pricing on your utility bill, register for a free energy e-book.

able to take advantage of cleaner energy

The main driver behind the growth in the cost of electricity is the continual increase in the demand for electricity. A report published by the US Department of Energy (DOE) in January shows that there is no sign of a drop in solar and wind power, despite lower than expected levels of investment. As more people are able to take advantage of cleaner energy, the need for residential retail prices to remain high will remain high.

While some analysts cast doubts on the long term viability of generating capacity growth, others see significant long term benefits. By 2021, the projected increase in electricity generated by these alternative energy sources will have paid for itself, according to the DOE. Similarly, by 2021, there will be a 50% decrease in annual demand from traditional plants, the report says. With these long-term benefits, it is easy to see why experts are already forecasting that the industry will continue to grow for decades to come.

less competitive against that generated by alternative sources

In the next few years, there are two major factors expected to exert a strong influence on the direction of electricity prices. One is the introduction of a new tax on carbon dioxide emissions, which is expected to come into force in 2021. The second is the gradual phasing out of nuclear energy, with both occurring around the same time. Because of this, experts predict that electricity generated by coal and gas will become less competitive against that generated by alternative sources in the foreseeable future. If the trend continues, it will be years before coal and gas make a comeback.

Another factor likely to impact prices further in the future is the introduction of a “switch off” period, which takes effect from 2021. This allows energy suppliers to avoid passing on any of the additional costs incurred when they use the defaults option, which could otherwise result in higher prices. However, experts say that there is little scope for further tweaks, with the default tariffs set to remain as they are. This article is for information only and is not intended to express recommendations in any way.

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