Electricity: Origins, Consumption and Costs

by Nick Gromicko, CMI®
April 2010  

Electricity -- the flow of electrical power or charge -- is a basic product of nature and one of the most widely used forms of energy in homes. It is generated from energy sources found in the environment, such as sunlight, coal and wind. China's Three Gorges Dam is the largest power plant of any kind. m

Houses themselves are, in effect, electrical devices, fed directly from utilities to power almost all appliances, from heaters to hair dryers. It is thus valuable for inspectors to have some understanding of where electricity comes from, what it powers, and what variables contribute to its costs.

Facts and Figures

  • The cost required to generate electricity varies minute by minute, reflecting its real-time demand throughout the day. Most consumers, however, pay rates based on average prices over long periods, saving them from volatile price fluctuations.
  • According to 2008 statistics, Tennessee had the highest per-capita annual energy consumption of any state in the U.S., coming in at 15,624 kWh, and Maine had the lowest at 6,252 kWh. The national average electricity consumption for a U.S. residential utility customer was 11,040 kWh.
  • In 1879, the California Electric Light Company in San Francisco became the first company in the United States to sell electricity. They produced and sold enough electricity to power 21 lights.
  • Compared to other sources of energy, such as natural gas, households are predicted to become increasingly reliant on electricity over the next quarter-century. China, India and smaller developing Asian countries will experience the highest growth in demand as they switch from outmoded forms of energy. 
  • The Three Gorges Dam in China is the world's largest electricity-generating plant of any kind. When it opens in 2011, the $26 billion dam will have a maximum operating capacity of 22.5 GW, enough to power 3% of all households in China, which is equivalent to its entire current wind-energy fleet.

How is Electricity Used in Homes?

According to national averages, electricity is consumed by American homes in the following distribution:

  • heating:  29%;
  • cooling:  17%;
  • water heating:  14%;
  • large appliances, such as refrigerators, dishwashers, clothes washers and dryers:  13%; 
  • lighting:  12%;
  • other household appliances, including stoves, ovens and microwaves, and smaller appliances, such as coffee makers and dehumidifiers, power adapters, and ceiling fans:  11%; and
  • electronics, such as computers, TVs and DVD players:  4%. 

Prices by State

Prices vary by location due to proximity to power plants and fuels, local fuel costs, and pricing regulations. The three states with the highest average prices for electricity in 2008 were:

  • Hawaii at 29.20¢ per kilowatt hour (kWh). Electricity prices are high in Hawaii because most of the electricity there is generated from petroleum;
  • Connecticut at 16.95¢ per kWh; and
  • New York at 16.74¢ per kWh.

States with the lowest average prices for the same year were:

  • West Virginia at 5.59¢ per kWh, which is a state that mines some of the country's richest anthracite coal veins;
  • Wyoming at 5.68¢ per kWh, which has a large bituminous coal-mining industry, along with natural gas production; and 
  • Idaho at 5.70¢ per kWh. Electricity in Idaho is inexpensive because of the availability of low-cost hydroelectric power from federal-owned dams. 

What Raw Materials Go Into Producing Electricity? 

Electricity consumed in homes and businesses in the United States is generated from the following sources:Chinese coal

  • coal, which produces 44.9 % of all power in the U.S.  Along with water, coal was used in the first power plants, and it remains the cheapest known raw material used to produce electricity. Rhode Island has no coal-generated electricity, while Wyoming’s electricity is 94.5% coal-derived. 
  • natural gas, which accounts for 23.4% of the country's total power. For an equivalent amount of heat, burning natural gas produces significantly less carbon dioxide than burning coal or petroleum.
  • Nuclear power, which produces 20.3% of all power used in the U.S., is a sustainable energy source because it releases no greenhouse gases, although opponents are concerned about security and waste disposal.
  • hydroelectric power, which has 6.9% of the nation's share. Worldwide, hydroelectricity accounts for 20% of all electricity generated, and nearly all power produced by renewables in general. While touted as producing no direct waste and requiring few personnel on site at dams during normal operation, some of the most deadly manmade disasters have been caused by dam failures used for hydroelectric power generation.
  • other renewables:  3.6%. Generation of electricity from the sun, wind, and other renewable sources has been constrained by technological limitations and stalled by local politics, although this sector is growing rapidly. Maine receives more than 26% of its electricity from renewable energy sources, while Tennessee receives almost none.
  • petroleum produces the least, at 1%. While it meets nearly half of the U.S.’s energy needs, petroleum is rarely used to generate electricity.

Other countries have significantly different electricity source profiles. France, for instance, generates almost all of its electricity using nuclear power.

In summary, electricity is produced from a number of different sources, each with its own upsides, and financial and environmental costs.
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