If you want to find the cheapest energy deals, you need to understand how you’re billed for energy. Knowing exactly what you’re being charged for gives you better insight and clarity into your energy bills, helping you not only ensure you’re paying the correct amount for your gas and electricity, but equipping you with the knowhow to seek out the best energy deal the next time you need to make a switch.
In this guide:
How much is electricity?
What is kWh?
How many kilowatt hours do my appliances use?
How much does 1 kWh of electricity cost?
Why is my energy bill more than my total kWh use?
How do I find out my electricity cost per kWh?
Why do electricity prices per kWh change?
Do I need to know my kWh cost?
Electricity costs can be broken down into several areas: there’s the cost of your actual consumption, measured in kilowatt-hours (kWh). On top of this many tariffs come with an additional daily standing charge, which covers the additional costs involved in supplying your home with energy. In most cases, your consumption is charged according to a single rate for each unit – or kWh – of energy you consume, regardless of when you consume it. Some tariffs, such as Economy 7, charge different unit rates depending on the time of day and night you use your electricity.
kWh stands for kilowatt hour and is a unit of measurement applied to your energy. Despite the reference to ‘hour’, the unit applies to each kilowatt you consume regardless of how long it took you to consume it – whether that’s 10 minutes or 10 hours.
The kWh measurement is useful when rating electric appliances to see how much power they consume. For example, a 1,000-watt microwave would consume one kilowatt of electricity if left running for an hour, but in reality you usually only use it for a few minutes at a time, so the actual consumption is a fraction of that – in our example, around 16-17 watts for each minute the microwave is on.
Some appliances designed to be left on 24-7, such as fridge-freezers, are rated differently. An A+ rated fridge freezer consumes around 270 kWh per year – divide that figure by days of the year (365) and again by 24 (hours of the day) to work out its kWh rating: 0.031 kWh (31 watts). Note, this is an average – in reality, fridge freezers are designed to switch on and off as required to keep your food at a constant temperature.
You can figure this out with simple maths:
Wattage of appliance (400W) x hours of use (3 hours) = 1,200 ÷ 1000 (the number of watts in a kWh) = 1.2 kWh
To determine how much you’ve spent on running that single appliance, just take the result (1.2 kWh) and multiply it by your energy tariff’s kWh rate – so, if your supplier charges you 15p per kWh, you’d have paid 18 pence (1.2 kWh x 15p/kWh) to run that appliance for three hours.
To discover if your appliance is using up too much energy, compare your findings to the average kWh usage of similar devices according to the Centre for Sustainable Electricity:
|Appliance||Average wattage||kWh rating|
The unit price – or price per kWh – of your electricity is determined by the energy tariff you’re currently on. There is a national average for electricity bills – currently £104.50 according to Ofgem – but this will vary widely, largely because unit prices vary widely from customer to customer – this is down to a combination of factors, including your energy supplier, the area you live in, and the market price of energy.
Even if you were able to calculate your energy usage to the last kWh, the result is unlikely to tally with the exact figure on your energy bill. That’s because most energy tariffs come with additional daily standing charges. In a small number of cases, energy tariffs exist that come with zero standing charges, in which case you’re only paying for your actual energy use. Don’t be fooled though – the additional costs are rolled into the unit price, which is likely to be larger than rival plans where a daily standing charge is added.
You can confirm the cost of your electricity per kilowatt hour by checking the initial paperwork you received at the beginning of your fixed price plan, or – failing that – by consulting your latest energy bill. If you’re on a variable rate tariff, charges should be clearly labelled, with costs broken down along with the various unit prices (if they’ve changed during the period covered by the bill).
Failing that, you can request the tariffs from your supplier or – to get an average cost of electricity per kWh spread across the course of your bill – simply divide your consumption (in kWh) by the total cost charged. For example, if you’ve been charged £44 for 238 kWh use, you’d be paying an average 18.5p per kWh (but remember that would also include the cost of your daily standing charge divided by 24, the number of hours in the day).
Your supplier purchases energy on your behalf from a variety of different sources – these may include its own sources (typically renewable such as wind farms or hydropower), but often this won’t be sufficient, forcing them to import energy from other sources by purchasing on exchange markets. As with all marketplaces, prices fall and rise due to various factors:
The type of energy has an impact on costs. Renewable sources generate ‘free’ electricity, but there are construction and maintenance costs to consider, while traditional fossil fuel costs (and nuclear) are built on proven technologies but limited by availability of dwindling stocks.
Many renewable sources are reliant on specific weather conditions: hot, dry, and sunny are good for solar, but bad for hydropower, for example.
The energy market runs like any other, and supply and demand will impact each other and the final price of your bill every month. That’s why prices fell early on in 2020 when Covid-19 drove down demand but have risen since.
This is often linked to demand, with people tending to use more energy in the winter – for example to heat their homes or put the lights on earlier in the day. As a result, prices sneak back up as demand spikes.
It’s useful, but not essential to know your current unit price to find a great deal. Simply filter by price when performing an energy comparison and you’ll see the cheapest deals tailored for you appear – if the bottom line is all you’re concerned about, you don’t necessarily need to look into the specifics.
That said, knowing how to fully unpack the details of offered energy plans will help you make the best decision. A quote on a variable tariff might seem great value, for example, but when the kWh cost changes over the course of 12-24 months you may end up having better off with a fixed-price plan.
As part of understanding your energy bills better, you should also account for your standing charge, as well as your general usage. Knowledge really is power when it comes to finding the best energy deal for your home.
Last updated: 9 November 2020