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Why do electricity prices fluctuate?

When you get your monthly bill, you know it will be painfully high. But can you ever predict the exact amount?

If you’re like many other Kiwi homeowners, probably not. Not only are rising utility costs making it hard to keep up... but the month-to-month fluctuations make it even more difficult to budget for power, even if you’re taking steps to reduce your energy usage at home.  

This article is about fluctuating electricity prices, addressing why it’s happening and how going with solar energy for your home can stabilise and lower your monthly charges.

Factors in the fluctuation of electricity rates

In New Zealand, as in many other countries, power rates have been in flux for a long time. Here are just some of the recent NZ stats showing how jumpy the energy market can be:

  • The biggest change in electricity prices in the past 10 years (2008-2018) happened in the second quarter of 2011, when costs went up 7.8% from the same time in 2010.

  • Power bills in the last quarter of 2017 went up by 2% from the same time in 2016.

  • Power costs dipped to a 15-year low in 2016, only to rise in 2017.

  • About 17,000 New Zealanders moved to spot-price electricity plans in 2017, but 10,000 moved away.


As you can see, it can be hard to predict when charges will go up or down, or how long they’ll stay the same. Homeowners are more likely to see the bigger seasonal fluctuations when it’s time to pay the monthly bill, but prices can still fluctuate sporadically.  

Here are some of the things affecting how much you pay.

  1. The costs of power generation

The companies that generate usable power, whether from renewable sources or from fossil fuels, have their own operating costs. These costs are just one piece of the puzzle. 

  1. The costs of maintaining the electricity grid

The grid, which is really a complex system of cables and stations for power transmission and distribution, also has big maintenance needs. There are ongoing operational and labour costs for the grid, some of which get passed on to consumers.    

In the event of extreme weather or accidents, parts of the grid can be damaged (sometimes causing power outages) and need to be repaired.

  1. Changes in fuel availability

More than 80% of New Zealand’s electricity comes from sustainable sources — geothermal energy, wind and water. But some of the power is also sourced from fossil fuels. 

When power demands are low, costs are also lower. But higher demand for fuel (such as during the winter season), or less access to sustainable energy sources regardless of the reason, can raise electricity costs.

  1. Broad changes in the wholesale energy market 

The competitiveness of the wholesale market determines how much local retailers spend to buy units of power. 

When retailers can purchase power at lower prices, they may pass some of the savings on to homeowners. But when wholesale power is expensive, you’ll likely feel the effects through higher bills. 

  1. Regulation and new technologies 

In New Zealand, the power market is currently under review in 2018. All parts of the industry, from regulation to the business practices of metering companies and retailers, are being looked at to ensure fairness and efficient spending throughout energy infrastructure.  

This includes reviewing the impact that new technologies, such as electric vehicles and other innovations around energy, will have on consumer electricity prices across the country. It’s hard to predict for now, but new technology and trends may lead to new national or regional policies, and in turn, even more price fluctuations.

How solar power helps homeowners keep costs steady and low

Fortunately, you can reduce your dependence on the grid. Get out from under the ups and downs of the electricity market with solar energy. Solar helps by making you your own power producer. 

Solar power systems capture sunlight and convert it to free electricity to use every day at home. With smart power management you can draw the majority of your power needs from a solar system set-up, only drawing from the grid when you need more kW than your panels are producing.

Another option is to go completely off-grid, using your solar panels and a solar battery storage (or a backup power system) to meet your power needs.

In either case, there are fewer worries about rising and falling utility costs, and an unpredictable grid. 

If fluctuating electricity costs have you frazzled, consider solar. You’ll be able to supply your own sustainable power with free energy from the sun, making your monthly bills lower and much more stable!

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