What Drives Electricity Costs?
The monthly cost of electricity is impacted by two key variables: electricity delivery costs plus the overall demand on the grid producing what customers consume.
Overview
The electrical market place has three main segments: residential, commercial, and industrial and each has varying degrees of seasonal weather adjustments that reduce or increase the electrical usage. Electricity being consumed is determined by temperature and humidity in relation to the demand for heating and cooling.
The monthly cost of electricity is impacted by two key variables: electricity delivery costs plus the overall demand on the grid in producing what customers are consuming.
RESIDENTIAL
The residential end-use sector has the largest seasonal variance, with significant spikes in demand every summer and winter. Virtually all homes that have air conditioning use electricity as the main source of cooling in the summer, while winter heating needs are met by a variety of fuels.
Homes use different types of power which impacts electrical consumption. For example, some use electric resistance heating and electric heat pumps, but even homes with other heating fuels such as natural gas or fuel oil still use some electricity to power furnace fans, boiler circulation pumps, and compressors.
COMMERCIAL
Overall, the commercial segment experiences less variance in electricity consumption during a year, But, that use shows a significant increase in the summer and a typical use increase during winter months.
When you compare commercial with the residential segment, a smaller portion of commercial sector energy consumption is devoted to heating, cooling, and ventilation.
in commercial location there are energy fuels beyond electricity which are commonly used to meet both heating and cooling needs. For example, some commercial buildings use natural gas-fired chillers for cooling.
INDUSTRIAL
The industrial segment demand for electricity remains consistent during the year, except it does have a slight increase in the summer months.
The reason for this is a much smaller portion of its energy consumption is used for typical heating and cooling consumption.
The cost variables play a very significant role in industrial energy use versus weather-related factors.
However, seasonal changes do affect industrial energy consumption. For example, in the refining industry, different seasonal slates of petroleum products as well as different seasonal processes may affect electricity needs.
SUMMARY
Comparing the three market segments of electrical users, residential customers cost the most to serve, since they have a wide range in hourly and seasonal demand, utilities must be equipped to serve peak demand with equipment and capacity that may be otherwise underused (or unused) much of the year. In addition, those customers cover a large geographical area which impacts the fees of electricity distribution.
The https://www.eia.gov website was used in research on this article and graphs were obtained from there.