Electricity prices

What Exaplains Electricity Price Differences by Country

Looking at the table above, one observes very substantial differences in electricity prices around the world. The most expensive countries in terms of electricity prices are a mix of two kinds. One kind is remote islands like Bermuda and the Bahamas that rely on fossil fuels for electricity generation with no option to import electricity from a neighbor. The high cost of electricity generation in those countries explains the high prices. The second kind are advanced countries, primarily in Europe, where high prices are due to high taxes and high transmission and distribution costs.

The lowest residential electricity prices are in Ethiopia, Iran, Syria, Sudan and a few other countries where one kWh of electricity costs less than USD 0.10. Some of these counties, such as Iran and Libya, subsidize their electricity prices as they are rich in energy resources. Others, such as Ethiopia, are pressed to subsidize prices as incomes in the country are very low and electricity is an essential product.

Of the big economies, prices in the U.S. are close to the world average whereas China’s electricity prices are about half of those in the U.S. In contrast, prices are much higher in Japan and, especially, in Germany.

Note also that business electricity prices are generally lower than household electricity prices, reflecting the effort to maintain industrial competitiveness.

The U.S. Energy Information Administration has an interesting overview explaining factors explaining electricity prices.

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Benchmark Data Parameters

The prices are per kWh and include all items in the electricity bill such as the distribution and energy cost, various environmental and fuel cost charges and taxes. The residential prices are calculated using the average annual household electricity consumption per year and for businesses, we use 1,000,000 kWh consumption per year. We do, however, calculate several data points at different levels of consumption for both households and businesses.

Price distribution

The chart shows the global average residential electricity prices at several levels of electricity consumption: at 25 percent of the average annual consumption, 50 percent, and so forth. The distribution is U-shaped: prices are higher at low and high levels of electricity consumption. Often electricity bills have a fixed payment which raises the per kWh price at low levels of electricity consumption. At the same time, many countries with regulated prices have lower rates for poorer households which explains the higher global average at higher levels of electricity consumption.

On the following chart are the global average electricity prices by firm size. Prices uniformly decline with firm size due to volume discounts.

Data Collection Methodology

Broadly, the collection of electricity prices depends on whether a country has liberalized or regulated power markets. In regulated markets, the government periodically announces new tariff structures. We use these documents to distill the information into the numbers that you see in the data set. The challenge is to have country-specific methodologies that ensure consistency across countries and over time using documents in local languages and changing formats.

In liberalized markets, we take power prices from the current offers of the largest electricity providers, the cost of distribution and transmission from the regulators, and the various applicable taxes and fees from additional research. We give more weight to providers with a larger market share. We also do research to see if the government has adopted any price support mechanisms as the ones that became widespread after the energy price shock in 2022. Here the challenge is to pull information from a variety of sources and to not miss anything.

Hence, for each country - liberalized or regulated - we have a separate methodology with sources and instructions on how to summarize the information. The sources and methodologies evolve over time. The methodology is described in more detail on the about page.

Unfortunately, few countries have electricity price reporting from official sources that is comprehensive, well-documented in terms of methodology, sustained in the same format over time and, most importantly, timely. Although official statistics exist, they often have a significant lag or changing reporting structure. One notable exception is the United Kingdom that check off all those boxes. On that count, it may be useful to read about the differences between our data and official statistics.

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World map: electricity prices

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