We understand that electricity, renewable energy, and natural gas markets are incredibly dynamic and pretty complicated like several other commodities. Energy prices are constantly changing and they often change by the hour. Changes in any one of these factors could be instrumental in intensifying volatility. This could lead to drastic changes in prices.
We know that usually, electricity prices would include the overall expenses for building, financing, maintaining, and efficiently operating the electricity grid and power plants. We are heading towards an economic slump due to the global COVID-19 pandemic. During these dire circumstances, it makes sense to understand the factors that drive overall electricity pricing so that you could consider slashing your energy consumption and lowering your electricity bills.
As per Forbes.com, there could be a boost in residential electricity demand due to the COVID-19 lockdown. Moreover, we understand that despite the deadly coronavirus outbreak the power industry in the United States has been demonstrating ‘resilience’ even during these difficult times.
Factors Affecting Electricity Prices
Weather: Weather is quite an influential factor impacting the consumption of energy and overall prices. We know there could be some unexpected fluctuations in weather conditions. That could trigger unforeseen inconsistencies in demand and consumption of There could be a boost in the overall cooling and heating demands. Triggered by extreme temperatures and this could culminate in shooting up of prices. Rain and snow are the major sources of water for generating cost-effective hydropower. Moreover, wind speeds could result in the generation of cheaper electricity.
Natural Calamities: Analysts are constantly monitoring the weather situation and keeping a strict vigil on natural catastrophes such as floods, blizzards, or hurricanes. These natural disasters could be responsible for extreme volatility in energy prices for extended periods. Especially, under the circumstances when electricity transmission. Market prices keep fluctuating in anticipation of extreme weather conditions and even post-natural disasters. When the overall impact and damage could be evaluated accurately.
Fuel Costs: Fuels are essential for the generation of but fuel prices are subject. To changes and that impacts the overall cost. Fuel prices particularly, petroleum and natural gas prices may shoot up when there is a relatively greater demand. For and even when there are major disruptions in fuel supply due to issues with delivery or transportation facilities. And even because of extreme weather conditions. A rise in fuel prices is directly responsible for a hike in electricity prices.
Power Plant Costs: Construction and maintenance of power plants involve a lot of money. Moreover, the operational costs of power plants are sure to influence the pricing of electricity in the long run.
Government Regulations: Electricity prices could fluctuate due to the changes introduced by the regulatory agencies. Moreover, certain regulations that impact the fuel industries could in turn reverberate on the natural gas and markets as well.
Geopolitical Events: In the countries that are involved in exporting and importing natural resources certain geopolitical events. Like war, political unrest, and even hostage crises could be adversely impacting the overall energy market and influence the short-term pricing of electricity.
We understand that many factors are responsible for fluctuations and variations in electricity prices. Environmental conditions and extremes of weather predominantly impact electricity prices.