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Politics : Politics for Pros- moderated
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To: Nadine Carroll who wrote (362369)5/3/2010 7:05:05 AM
From: Maurice Winn1 Recommendation  Read Replies (1) of 793843
 
That's right Nadine, energy does have transportation costs, such as the line losses I mentioned. The point I was making is that the price should not be a function of the cost of production but the demand.

Suppose there are 4 production facilities next door to each other - 1 hydro, 1 nukular, 1 geothermal, 1 oil, 1 Orimulsion, 1 coal, and 1 windfarm [turned out to be more than 4].

Each has a different cost to produce the electricity. Some can store the energy better than others. Wind can't be stored at all [unless it's used to pump water uphill or something]. Hydro can easily be stored by shutting the water flow. Oil, Orimulsion and coal can be slowed down by cutting the fuel input. Geothermal steam output can be shut.

But the buyers will pay the same price to each because the buyers don't care how much a kilowatt-hour costs to produce, or how it is produced. They will just pay whatever price is on offer.

If the hydro is free to produce because of the particular situation, without even having to build a dam or tunnel, the electricity from it will still be charged at the same price as the most expensive source of electricity because that's the value to the buyer. A sensible seller will sell at the price the market will bear.

Mqurice
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