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Top 3 Factors Affecting Electricity Prices

The cost of electricity varies greatly based on a number of factors: the prices of coal, natural gas, renewables and other sources of power.

Let’s examine some of the most important factors more closely:

#1 The capacity factor of different power sources

A capacity factor measures the running intensity of a generating unit.

A crucial shift has taken place last year: the average capacity factor of natural gas combined-cycle plants ended up higher than coal power plants.

What does this mean?

For example, a capacity factor approaching 100% tells us that this unit is 1) operating near its maximum possible power output and 2) operating almost constantly. This increase of capacity factor indicates that electricity generation in the United States is shifting towards using a mix of energy sources. In fact, the use of coal steam power plants has experienced a steady decline in the past ten years, while the utilization of natural gas combined-cycle plants is much higher today.

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