How Retail Electricity Works and Where It Comes From – Pt 1

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What is retail energy? Before energy deregulation, energy consumers like homes, schools, and businesses were required to buy all the power they needed from the local utility company. The utility company generated electricity however they saw fit, and consumers paid whatever prices and fees were demanded of us. We didn’t have a choice or any power to influence the industry in any way. This arrangement made sense from a stability standpoint. However, it wasn’t exactly fair to the consumer, and abuses of the monopoly occurred all the time.

This is exactly why energy deregulation was one of the best things to ever happen to consumers (i.e., everyone). Suddenly, not only were independent energy producers able to open up shop, but consumers could choose to buy their energy based on their budget and best interests instead of from the single authorized source. This new way brought about the rise of hundreds of individual retail electricity providers and supply companies.

But how, exactly, does retail energy work? How does the energy you’re buying from the new company differ from the energy that’s always come through your wall? And perhaps most perplexingly, how does the new energy you just bought come through the same wires, outlets, and grid connection that the utility companies installed?

That is exactly what we’re here to explain today.

Where Retail Energy Comes From

The most important thing to understand is that retail electricity is not generated inside the utility company power plant. This is not just an illusion with businesses passing money in a circle to pretend like you have choice. Deregulation has allowed independent power generation companies and facilities to start selling energy separately. Retail energy companies either buy energy from the new sources or build their own power generation facilities. They are selling you new independently generated power separate from what the utility company can provide; though it will enter your building the exact same way through the currently installed outlets and wires.

Sustainable Retail Energy Generation

Those pictures of wind turbines and solar panels aren’t just for show, either. While many retail energy companies buy power from independent plants, those that advertise sustainable energy really do have (or work with companies that have) sunny fields full of turbines and solar panels soaking up freely available natural resources like wind and sunshine. There are even a few conveniently located retail energy producers that generate through hydroelectric turbines spun by fast-flowing rivers or well-placed dams. When you buy from these providers, you’re contributing to the sustainability movement by putting your money where your values are. Every customer of a sustainable retail energy provider pays for the building of more panels and wind turbines, tipping the market toward non-burning generation.

The only question is how to compare business electricity plans and choose the right one.

Buying Your Power

Of course, each individual retail energy company has their own ups and downs, deals with their own peak hour concerns, and will set up pricing in their own way. Every commercial and residential energy consumer will need to select their retail energy company carefully in order to get the best possible deal for their neighborhood and energy needs. Each new retail energy company has their own set of policies, pricing packages, and options for customers; you’ll want to compare business electricity plans before deciding the best retail energy option available to you.

When you do choose a provider, switching energy companies is a snap. All you have to do: let your old company know you will not be renewing your contract; then let the new company know you’d like to be a customer. Within seven days, your records update, and the new company sends your next billing statement. It’s as simple as that. And for anyone scratching their head wondering what the point is when nothing changes except what’s on paper, we’re ready with the answers.

How Retail Energy Gets to Your Outlets

How the electricity gets from your new provider to your building is perhaps the most complicated part of the whole process. Many people find themselves wondering, “Where does the electricity come from?”. After all, nothing appears to change.

When power was regulated, city planning built a shared grid made to deliver power from the central plant location to everyone in the region. That infrastructure is still in place. Back then, it was a little totalitarian, but it was uniform, and you knew what to expect. When switching to retail energy, it’s not unreasonable to at first expect there to be a new installation, a new line run to the building, or at least a new adapter on your fuse box. But retail energy isn’t like ordering cable TV. The energy you are buying from the new provider doesn’t need any new infrastructure, just access to the grid. As it turns out, it’s exactly like solar net metering. The energy is fed into the existing shared city infrastructure that reaches everyone. Here’s how it works:

  • You Buy Retail Electricity
  • Retail Energy Sources Produce More Power
  • Electricity is Fed to the Shared City Grid
  • Grid Delivers Electricity to Your Building

To be continued in Part 2…

No matter what kind of energy needs your organization may have, we can help. You can reduce costs, become more efficient, and integrate sustainable energy into your infrastructure. Contact us to learn more about the workings of the energy industry and how you can get better deals and service, and support sustainability in the long-term.

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