Correlation between the cost to produce electricity and the cost to consumers?

  • #1
Sorry if this is a bad question, but would lower costs to produce electricity (e.g. hydroelectricity instead of solar) bring down the overall costs for us consumers? Also, if there is any reading material or website on this topic, that would be really great too! Thanks!
 

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  • #2
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Typically: Yes. But you can rarely change one thing in isolation and nothing else (taxes, market structure, ...).
 
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  • #3
Astronuc
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Sorry if this is a bad question, but would lower costs to produce electricity (e.g. hydroelectricity instead of solar) bring down the overall costs for us consumers? Also, if there is any reading material or website on this topic, that would be really great too! Thanks!
This is a good question, as it affects everyone, particularly those on a limited income.

A summary for the US (2011) - https://www.npr.org/sections/money/2011/10/27/141766341/the-price-of-electricity-in-your-state
https://en.wikipedia.org/wiki/Electricity_pricing

There are costs associated with generation (capital costs, operations and maintenance (O&M), taxes and fees, and fuel). In addition, there is the cost of transmission and distribution with associated costs of capital, O&M, taxes and fees.

Lower generation costs is a goal, while maximum profitability is a goal for the generator. Nevertheless reducing fuel costs would help lower cost in general.

Some discussion on energy generation in the US.
https://www.eia.gov/energyexplained/index.cfm?page=electricity_in_the_united_states
 
  • #5
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There are two costs - the production and the capital cost. PV solar has essentially no production costs, but the electricity provider has to make a return on the capital cost of purchasing and installing the panels. The capital cost is driven not only by manufacturing costs, but interest rates and the cost of equity capital. For most in the US, electricity costs have declined along with the price of natural gas, which accounts for about 40% of electricity generation.

In the US regulated utilities set prices to earn a fixed return on their capital, so a reduction in overall input costs will reduce the retail price of electricity
 
  • #6
256bits
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bring down the overall costs for us consumers
If something is expensive, consumers would tend to use less of it to lower their overall cost. If it becomes less expensive, consumers may decide to use more, ending up with the same overall cost as before. Expensive being the price per unit, and "overall cost" being % of income. so it may not matter if those are the only qualifying conditions.

On the other hand, if the unit is something you depend upon then other relationships can apply. If you were charged per amount of air you breath in a day, how much control could you have on the overall cost, except to place limits upon physical exertion, which then extends to other areas of what you can accomplish per day.
 

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