Price of Electric Power

The price of electric power in the United States follows the general movements of the price of its inputs, chiefly coal, natural gas and nuclear isotopes. Coal generators produce about 20.0% of all electricity in the United States, while gas and nuclear power account for almost 60.0%. In recent years, the makeup of energy generation shifted from coal to natural gas. Natural gas is considered cleaner and with the discovery of new gas shale through the emergence of horizontal drilling technology, natural gas has experienced heightened use as an input to electricity generation.

The prerecession domestic construction boom and rapid industrialization of China and India caused continual increases in the demand for electric power. A ramp-up in construction in the US and Asia caused dramatic jumps in demand for electricity to power newly built buildings. The jumps in demand put a strain on the producers of the raw materials used to generate electric power, namely natural gas, coal and uranium. The prices of these inputs increased dramatically when producers could not keep up with the rising demand, forcing electric power generation companies to pass that cost on to consumers. As a result, the end price of electric power increased steadily, leading up to the 2008 financial crisis. However, the price increases were substantially less than the input price increases because various government levels strongly influence the price of electric power.