How to calculate the price of a kWh?

To calculate the price of a kWh for a certain fuel or energy carrier is not trivial. The reason is the different and sometimes complex price or tarif or structure.

In case of fuels that are tradable without infrastructure – such as heating oil, coal, fire wood and wood pellets – the price is rather clear: It is constant with the volume bought, or only slightly regressive.

It looks different with fuels that are delivered via infrastructure, provided by a utility: natural gas and electricity.

Here, the price structure models are very different and sometimes complex. The kWh price usually consist of two parts: a fixed part and a variable part. This splitting has the effect of a decreasing (marginal) price per kWh, depending on the level of consumption.

Concerning heating, most countries have certain night tariffs, usually used for heating. This must be considered. Therefore, a certain level of annual consumtion must be assumed.

We use price data that include fixed and variable price elements for an assumed representative household. Generally, we assume for electricity a consumption of 15.000 kWh per year.

This means that our prices are not short term marginal prices. For an existing contract and fixed prices already being paid, a single kWh might be cheaper than noted here. However, for a fair comparison, we must include monthly or annual fixed costs.