2024 and 2025 electricity predictions on pricing
What are the 2024 and 2025 electricity predictions on pricing?
The electricity price predictions for 2024 and 2025 suggest a potential for price increases, influenced by various factors. The U.S. Energy Information Administration (EIA) forecasts an increase in electricity sales to U.S. customers by more than 2% in 2024, driven by factors such as high and potentially increasing underlying fuel prices for natural gas and coal. The shift towards renewable resources is also expected to impact the generation mix, with renewable resources growing to 24% of the generation mix in 2023, up from 22% in the previous year.
An Energy Report indicates that electricity prices are not expected to decrease in 2023, with the national average electricity price increasing over 10% year-over-year in the first half of 2023 to an average of 17 cents per kilowatt-hour. This Energy Report attributes the rapid electricity price increase in 2022 to factors such as supply chain disruptions during Covid-19 lockdowns, the Russian war in Ukraine, and profiteering by major oil companies that supply fuel for power plants. These predictions point towards potential electricity price increases in 2024 and 2025, driven by a combination of factors including fuel prices, the evolving generation mix, and geopolitical events impacting the energy landscape. However, it's important to note that actual price changes will depend on a range of variables and market dynamics.
Electricity pricing is influenced by various factors, including:
Fuels: Fuel prices, especially for natural gas and petroleum fuels, may increase during periods of high electricity demand, leading to higher costs to generate electricity
Power Plant Costs: Each power plant has financing, construction, maintenance, and operating costs, which can impact electricity prices
Transmission and Distribution System: The electricity transmission and distribution system incurs costs, which are reflected in electricity prices
Weather Conditions: Extreme weather events can affect fuel supply and demand, leading to fluctuations in electricity prices
Regulations: Regulatory policies and market structures can influence electricity prices, especially in deregulated, competitive markets
Demand: Electricity demand, especially during peak hours, can impact the cost of supplying electricity
Generation Mix: The mix of energy sources used to generate electricity, including the increased use of natural gas and renewable resources, can affect electricity prices
Geopolitical Events: Events such as supply chain disruptions, geopolitical tensions, and fuel supply constraints can impact electricity prices