Sunday Sales Series: Distribution costs are the bigger pie

My former company, Choose Energy, has a list of electric rates by state. As you can see, the average US home consumes 897 kWh per month. And the average electricity rate in the US is 13.26 cents per kWh. This means the average US household pays a $119 monthly utility bill. This fact won’t surprise many.

The lesser known fact is the cost split between the energy supply and the distribution. 15 years ago the supply cost was ~66% of the energy bill and the transmission & distribution costs (the cost to maintain the poles & wires) was 33% of the bill.

Today, the energy supply prices are cratering due to the lower cost renewables replacing carbon-based generation. Now in the US, the energy supply tends to be below 50% of the bill and falling fast. In some parts of the US the supply portion of a bill is as low as 25% of the total cost.

On the other side of the equation, the cost to maintain our creaky power grid’s transmission (big scale) and distribution system (local) is only getting more expensive as weather events and general physical-world problems wreak havoc on the infrastructure.

Over the past two decades the majority of the energy entrepreneur focus has been on the energy supply side of the equation. I am just now starting to see more businesses focusing on the transmission and distribution opportunity. And given that Americans pay more for the distribution than the power itself, there should be a big reward for the company’s that focus on this distribution opportunity.