I don't understand. I thought that's what generally made electricity MORE expensive - the fact that it's distributed such that the way it is generated has little bearing on what the consumer pays.
Wouldn't our electric be cheaper if all of it came from Calvert Cliffs?
That's my point - it's not to the specific generation costs of the plants in a particular area, but that the electricity generated acts as a local commodity rather than a global one, with less regard to the cost of the (local, as the case may be) generation. Simplifying the model (as, in reality, the grid is no where near this simple): If everyone in a given area can only get their electricity from one generation source, and the demand from that area is greater than the generation capability of that one source, the price of electricity in that area is going to climb even if that source is able to generate whatever it does generate at a fairly low cost. The local (and limited) nature of the commodity market makes the actual generation costs less important with regard to the commodity's price. The reality that you might be able to build a dam on the Ganges River and generate electricity, at relatively low cost, wouldn't really help drive down the commodity's price in the hypothetical area - it wouldn't be adding effective supply to that area (unless it was proximate enough to the dam and its generation capability).
If electricity acted like a global commodity rather than a local one, that would mean that there wouldn't be local supply/demand issues (which can't necessarily be addressed in a timely manner) - only global ones.
If all electricity generation was fungible - if when, where, and how some source in particular produced it had no bearing whatsoever on what it was paid for it - then producers would, all other things being equal, seek to produce it as cheaply as they could, to the extent doing so is plausible (e.g. they might devote resources to developing hydro generation capability rather than coal, or natural gas, generation capability, or, finding that it's easier to get approval to build a nuke plant in an unpopulated, geographically less-consequential area, than it would be to build one in a particular area where extra supply was actually needed, they may choose to do that rather than building a new coal-fired plant).
Production would tend to move toward (and centralize around) where it was cheapest to produce it. The price would find the level it needed to in order to make sufficient global production profitable. One effect would be that plants would run nearer full generation capacity for a greater portion of the time than they do now - there'd be less capital investment cost, and less fixed operational cost, relative to output. As it is, we have to have excess generation capability, and spend extra resources on fixed (i.e. non-marginal) costs, so that we have the ability to generate what is needed (where it is needed) during peak usage times. We can't store the production to be used when and where needed. Coal plants could be built where coal is abundant, nat gas plants where nat gas is abundant, wind farms (to the extent they make any sense) where wind is abundant, nuke plants where the regulators could care less about the potential for a Chernobyl incident (I keed, I keed) - all without regard to where the electricity is needed.
That all goes to lowering production costs overall, not to the effects that market dynamics may have in determining prices. The thing is though, so long as there is no foreseeable concern regarding the global market's ability to produce whatever supply might be needed going forward (which, with global electricity production, unlike with oil, there shouldn't be), the market driven price for a very fungible commodity can't diverge too far from the actual cost of producing that commodity (at least, the cost of producing the last portion of it needed to meet demand). If existing productive capacity is driven solely by individual producers' choices (which are themselves driven by anticipatable compensation) acting in a global market (rather than being constrained, as to the number and variety of participants, by the existence of mostly local markets), there's too much incentive for individual and varied producers to increase the overall productive capacity when the anticipated compensation starts to diverge from the would-be actual production costs. We can already make electricity for, on average, 4 cents a kWh, whereas it costs consumers, on average, more like 12 or 13 cents delivered. If it were readily transportable and store-able, we could produce it cheaper and we could definitely deliver it cheaper. Making it so (i.e. readily transportable and store-able) is a battery problem.
