Electricity price is one of the important factors affecting the price and quality of people’s lives. Therefore, a clear understanding of electricity production price is essential to be able to make appropriate business and policy decisions. In this article, we will learn about the concept of electricity price, how much electricity costs to produce and the factors that affect electricity prices.
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What is the electricity production price?
Electricity production price TTTT is the selling price of electricity produced by power plants, calculated per unit kilowatt hour (kWh). This is the base price to calculate the electricity selling price to the final consumer. The electricity price includes costs to produce electricity, including fuel costs, operating and maintenance costs of the power plant, and operating costs. Equipment depreciation, labor costs and some other taxes.
Electricity prices are established through a competitive electricity auction mechanism. In this mechanism, power plants will auction their electricity prices. The power plant with the lowest electricity price will be selected to supply electricity to the grid. This lowest electricity selling price will become the electricity production price.
This ensures transparency and fairness in determining electricity production prices. Without an auction mechanism, power plants can arbitrarily offer higher electricity prices, leading to a lack of competition and affecting the final electricity price for consumers.
What factors affect the price of electricity produced?
Electricity prices are affected by many factors, including:
Fuel costs are the most important factor affecting electricity prices. Electricity is produced from different energy sources such as coal, oil, gas or solar power and their prices can change over time. When fuel prices increase, electricity prices also increase.
In 2020, fuel prices in Vietnam increased significantly, especially coal and oil prices. According to a report by the Northern Power Corporation, fuel costs in electricity production increased by about 7% compared to the previous year. This has affected electricity prices and led to an increase in electricity prices for consumers.
Power plant operation and maintenance costs
Power plant operation and maintenance costs also affect the price of electricity produced. This is the cost to maintain the operation of the power plant, including repair costs, equipment maintenance and staff costs. When this cost increases, electricity prices also increase.
According to a report by the Southern Power Corporation, operating and maintenance costs for the power plant increased by about 5% compared to the previous year. This is attributed to increased labor costs and other costs related to maintaining power plant operations.
Equipment depreciation expense
Equipment depreciation expense is the cost to repay the investment in the power plant. This cost is evenly distributed throughout the operating life of the power plant. The longer the power plant’s operating time, the lower its equipment depreciation costs. This means electricity prices will decrease over time.
However, to ensure transparency and fairness in determining electricity prices, power plants must comply with regulations on equipment depreciation costs prescribed by the Ministry of Industry and Trade. This ensures that the price of electricity produced is calculated accurately and is not inflated.
Labor costs also affect electricity prices. This is the cost to pay salaries to employees in the power plant, including engineers, technicians and general workers. When this cost increases, electricity prices also increase.
According to a report by Vietnam Electricity Group, labor costs in electricity production increased by about 6% compared to the previous year. This is attributed to increases in salaries and other employee-related costs.
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How will electricity production prices in 2023 fluctuate?
According to forecasts of the Ministry of Industry and Trade, electricity prices will continue to increase in the coming years. It is expected that by 2023, electricity production prices will increase by about 8-10%, especially due to increased fuel prices and labor costs.
This will affect the price of electricity sold to final consumers. However, to ensure fairness and protect the interests of consumers, the Government has policies to support electricity prices for disadvantaged people and poor households.
How much electricity costs to produce is also a question that many people are interested in. According to a report by Vietnam Electricity Group, current electricity prices range from 1,500 – 2,000 VND/kWh, depending on the area and level of use. However, this price may change with time and influencing factors as mentioned above.
Below is the September 2020 electricity price list announced by Vietnam Electricity Group:
|Production electricity price (VND/kWh)
|1,242 – 1,858
|1.242 – 1.858
|1.242 – 1.858
Electricity prices may change over time and are influenced by factors as mentioned above.
Above is basic information about the price of produced electricity, how the price is formed and the factors that affect the price of produced electricity. Production electricity prices not only depend on equipment depreciation costs and labor costs but are also affected by many other factors such as fuel prices, operating costs and Government regulations.
Understanding the price of electricity produced will help us have an overview of electricity prices and how to calculate the selling price to the final consumer. At the same time, applying electricity saving measures will also help reduce production costs and help electricity prices be more stable in the future.
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