It was a tough year last year, not least because many of us were spending a lot of time at home and spending more money on essentials like electricity.
So here’s some good news to come out of 2020: wholesale electricity prices dropped and, as a result, your energy rates probably will too.
What are wholesale electricity prices?
The wholesale cost of electricity essentially refers to the cost of generating electricity. This makes up part of what you pay for electricity (known as the retail price) along with transportation costs, retail costs and price caps to protect against volatile pricing.
Prices decreased in 2019-2020 largely due to lower fuel costs for generators and increased renewable energy generation (which is cheaper than traditional fossil fuel generation).
In fact, the wholesale price more than halved. As depicted in the graph below, prices dropped from around 12 cents per kWh in early 2019 to around 5 cents by August 2020.
What does this mean for my energy rates?
Most power companies set their retail energy prices ahead of time based on the wholesale market. Because wholesale prices came down substantially in 2020, we’ll see considerable retail price reductions in 2021. For consumers, that means cheaper power.
So keep an eye out for any price change notifications from your power company. It might even be time to shop around and see what other power companies are offering.