Any time a person sets out to understand the cost or price of electricity, they are likely to underestimate the task they are about undertake. This is not due to some public oversimplification, as you may find in the field of quantum physics (where article comments would have you believe there are quantum physicists lurking around every corner). No, the task is underestimated because the breadth and depth of knowledge necessary to understand electricity pricing is obscenely (unnecessarily?) high.
This isn't some national attempt at hubris, though, it's the glorious result of a mass of individuals trying to do the right thing in a competitive marketplace of ideas. So, enough with the big talk now, let's get some basics down.
First and foremost remember that we are talking about electricity. This is the stuff that will fry you dead, the stuff that turns on the lights, the stuff that lightning is made of, and is made of elections. This has a couple interesting impacts. Two big ones I'd like to mention are:
A) You don't know whose elections are where. Literally, it is impossible to tell where the electrons that are making your computer run came from. Quebec? Atlanta? Four Corners? Who knows? Any measurement that involves "delivering" or "sending" power rely on measuring the flow onto and off of "the grid." Any grid can be thought of as a pool with several hoses going in and several hoses going out. You pay for what goes into your hose, but you don't know where it came from.
B) You have never seen a time when more electricity was being generated than was being used (including dumping into storage) at the exact same moment. When your A/C kicks on in the middle of a hot summer night, somewhere a power plant turns up just a tiny bit. When your smartphone stops charging, somewhere a powerplant ramps down just a smidge. This is why renewable power isn't covering the planet, because if the wind starts to blow harder, something else has to stop generating (sounds good, right?). If the wind suddenly dies, somewhere a power plant has to pick up the slack... immediately... as in, less than 60 seconds. (That's the expensive part).
Second, compared to the energy we create with our bodies, a typical household uses an insane amount of power. If you used a bicycle to generate electricity for your house, you'd get about 100 watts per hour from it. The typical home, as a rule of thumb, uses 10,000,000 watt hours of energy per year. That's 10 megawatt hours, or 10 MWh. In other words, you'd need about 34 professional bikers, working in 8 hour shifts, riding every single day all year. That's for a house. As another rule of thumb, your average big box retailer (Walmart, Target, etc) that has a grocery section uses over 5,000 MWh per year (assuming a 1mw peak and a 60% load factor). That's 500 houses worth, or 17,000 bikers! To keep up with the demand, utilities and other power providers build power plants.
A power plant is an enormous, giant, heavy, dangerous piece of equipment that is necessary to generate electricity. A larger power plant that is operating well can generate about 7,000,000 MWh per year (assuming 1,000 nameplate and 80% capacity factor). That's 1,400 big box retailers or 700,000 homes or more than every living person in the New York City metro area biking away. That's a lot of juice! To generate all that power you need lots of fuel. Here are two photos that put things into perspective. A picture of a giant dump truck next to a person and also next to a coal mine. I use a coal example, not because I'm trying to promote it, but because it makes the volume of material required quite visible. Check out the Homer City Generating Station. Then, using a different tab, pull up your neighborhood. Check the measurement bar and zoom them so they are about the same. Just look at how huge that thing is. Then go just north of the smoke stacks and you'll see a big black splotch, that is the coal pile. The coal is stored there before it's burned. If you zoom in and look close you can see some pick-up trucks driving around the pile and they look so tiny.
So, we didn't necessarily get into anything fancy or altogether to detailed about electricity this time. However, these two facts will appear over and over again. It's important to remember at every single level of the industry decisions are driving by (among other things) the fact that electricity is dangerous as hell and is made by huge, enormous, machines.
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