Factors That Determine Wholesale Electricity Prices

In the past, getting wholesale electricity used to be something only large-scale buyers could afford. Times have changed and now even a homeowner can buy wholesale electricity if he or she is savvy enough. If you intend to buy or have been buying wholesale, you’re probably wondering about the factors that determine the prices. There are several variables that could determine the price of various units.

According to statistics, in 2017 the average price for electricity was 6.91¢ per kWh for industrial businesses and 12.90¢ per kWh for residential use. You stand a chance to save hundreds if not thousands of dollars in energy bills every year when you start buying electricity in wholesale.

You’ll probably want to know the industry factors that could determine prices when you’re buying wholesale. In most instances, there will be a fixed charge or it’s possible the system could be tied to real-time pricing. For fixed payments, the factors that contribute to determining prices will have a significant impact on the amount that you pay. Here are some of the factors that determine the prices for wholesale electricity.

Fuel Price Fluctuations

Fuel Price Fluctuations

This factor will determine both the price for wholesale and retail electricity prices. The price for the fuel which is used to produce electricity will have a bearing on the final cost. The higher the price, the higher the cost of electricity. You should be aware of the fuel prices so that you’re not surprised when you see an increase in the cost of wholesale electricity.

Cost of Infrastructure

The costs involving the infrastructure and maintenance could result in an increase in energy bills. When there is a storm that interferes with power lines, you’re likely to see an increase in prices for the electricity units. It might take some time until the repairs are done. This means you will continue to get the high energy bills since the problem hasn’t been fixed. The best way to avoid such a predicament is by entering into a contract with the energy provider so that you’re not inconvenienced anytime there is an issue with the infrastructure. You’re not likely to be affected even if there is a surge in energy bills.

Consumer Demand

Consumer demand will always have a say in the price of commodities and services and wholesale electricity is no exception. Electricity demand tends to be higher in the summer because of the need for cooling throughout the day and night. It is also the time of year when expensive supplemental sources are used in a home.

Regulations

Regulations
There are occasions where the rules and regulations set in place make it hard for energy companies to provide wholesale electricity at fair prices. It could be high taxation rates which are then transferred to consumers in terms of high electricity tariffs. Even with high taxation rates, you can still get Electricity Wholesalers Houston offering affordable prices. The key is to do your research even if you’ll be buying wholesale for retail purposes.

Location

The location could also play a big role in determining prices. If you live in an area that is near power plants, you’re likely to be charged less compared to other people. A place with several industries is also likely to be expensive. For a homeowner, you might not have a lot of choices in terms of where you stay but you’ll still want to get a good deal when buying wholesale. You can be sure you’re getting the best deal by tracking the electricity costs in your state for a certain period of time.

Market Cycles

Electricity is unlike other products in the market in the sense that it can’t be stored. This means the market can’t put down reserves to alleviate the prices. As a result, there might be frequent inconsistencies with price changes which will have a big impact on what you pay for wholesale electricity. There is an energy market cycle where prices fluctuate a lot and the impact is most likely to be felt by the consumers.

Geopolitical Events

Although seldom, geopolitical events could also have a say on electricity prices. This is especially true if electricity is being imported from another country or territory. The two countries could be at a standoff and one country will want to punish the other. As a consumer, it is important to be aware of the factors that influence wholesale electricity prices so that you’re prepared at all times.

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