Power generation has a variable cost
Like any activity, generating electricity has a price. A solar panel installation costs money, as does its optimisation, monitoring and maintenance. For power that depends on a raw material, such as thermal energy, the price of the raw material must also be taken into account. Regarding oil, you only have to follow the changing price of crude oil to get an idea of its impact on the generation of one kWh from this source.
Power generation is not always constant
The same amount of energy is not always produced. Take renewable energy, for example. There are cloudy days, on which the sun cannot be used for solar thermal power plants. There are periods of drought, which reduce the flow of rivers and limit generation in hydroelectric plants.
It should also be borne in mind that power generating companies make decisions on how much to produce based on lots of factors: whether there is going to be enough demand, whether the price they will receive per kWh will be profitable etc.
Energy demand is not always constant
There are times of the day, month or year when the demand for electricity in our country rises or falls. We know that in the coldest months we usually turn on our heaters, while in the hotter months we turn on our fans or air conditioners. It is also clear that most people sleep at night, reducing energy consumption.
Therefore, the higher the demand for energy, the higher the prices that the distributing companies will pay per kWh. And the opposite is also true. For this reason, in off-peak hours, those with the lowest demand, you will see that the regulated market prices are usually lower.
In this scenario, it is logical to think that a consumer with a regulated tariff can concentrate their energy consumption and take advantage of the hours in which a kWh is cheaper in order to save money. However, on many occasions it is inevitable that electricity consumption coincides with peak hours and not with off-peak hours. Let's take an example: not everyone can wait until 1 am to use their washing machine, nor can everyone at home endure summer only using the air conditioning from 3 to 5 am. This must be added to some consumption that’s constant, such as that of a fridge. And we cannot forget the uncertainty that the variation in the price of energy can generate: if you need to use the washing machine and the price of kWh is through the roof, how many days can you delay the laundry so that it comes out at the best price?