Electricity is priced in a manner that facilitates its dispatch on-demand, to provide power for the end-users and also to reduce wastage of Electricity in storage batteries and electric heaters. A perfect mix of factors like quality of transmission and distribution, prices and surcharges, incentives and risk take shape in the Electricity price structure. The Electricity Price Structure assists the market participants by stabilizing the prices and helping them meet their cost of capital. It is important to note that without a proper mechanism to ensure correct pricing, markets would become flooded with cheap electricity which would not be available to the users at all.
stabilizing the prices and helping them meet their cost of capital
On the one hand, the Electricity Price Structure assists the market participants in stabilizing the prices and helping them meet their cost of capital. This would help them avoid heavy losses and also enable them to recover the investment made in improving the quality of distribution and transmission. On the other hand, the Electricity Price Structure helps them minimize the losses in the fluctuating renewable energies sector. Through the pricing, the stakeholders can track the revenues and expenditures on renewable energies. The major factor that affects the revenues and expenditures is the price of electricity for the end-users.
demand and grid congestion
Two major factors affect the pricing of electricity: demand and grid congestion. On the one hand, the demand for electricity in the market determines the price of electricity. On the other hand, grid congestion defines the prices of the off-peak hours. Off-peak hours are the hours when there is minimal use of the grid and most of the power usage occurs during the night hours when the power demand is lowest. Thus, it can be estimated that the prices of off-peak hours are higher than the prices of peak hours.
the average electricity demand is about 1250 kilowatts per hour
In the European Union, the average electricity demand is about 1250 kilowatts per hour. The most typical electricity demands in the European Union are in the daytime (when electricity demand is at its highest) and during the evening. In both the hours, there is a considerable variation between the hourly data.
wind turbines decline the growth of greenhouse gases carbon dioxide
The second factor that affects electricity prices is the generation of electricity. It has been estimated that electricity prices will continue to rise because of the continued rise in the number of wind turbines. As a matter of fact, the use of wind turbines has contributed to the decline in coal generation and the rise in natural gas generation. Wind energy is considered the most promising renewable source of energy. As a result, the use of wind turbines contributes to the decline in the growth of greenhouse gases like carbon dioxide.
the increase in the sales value of the wind turbines
As a result, the revenues of the electricity companies will increase because of the increase in the sales value of the wind turbines. However, the revenue generated will still not be equal to the expenses incurred because of the costs of maintaining and repairing the wind power plants. These costs are typically paid to the utility companies. These revenues are used by the government and companies to offset the revenues lost due to the fall in revenues.