The cost of electricity

There is a large difference between the cost of generating electricity and the price of electricity paid by consumers. The difference is the cost of transmission & distribution (including ancillary services) and taxes. To a large extent, the cost of electricity is the cost of distributing it.

In a generic model, L Elder and M. I Beardow demonstrate, a.o. how the unit cost of distribution increases, and reliability decreases with reduced electricity demand per customer. According to the graph, the cost of distribution (not including generation, transmission or taxes) would be around 7 c/kWh for an average European family using 3,500 kWh. It would go up as high as 13 c/kWh for a demand of 2,000 kWh, i.e. a family investing in high efficiency appliances and lighting, and serving heating needs from non-electrical sources. For an all-electric passive house, with 2,000 kWh demand for appliances & lighting, and 3,000 kWh for heating, distribution costs would go down to 5 c/kWh.

This begs the question that for a reduced energy demand, we no longer can afford distribution of multiple energy utilities, and if we select a single utility, electricity is a good candidate. Considering the many methods available to generate electricity, many of which with low or reduced carbon content, an all-electric system, based on high efficiency buildings and appliances, with a high portion of renewable generation, may be one of the most promising, cost effective routes forward.