The market in power should only exist to optimise. Its become a rei-ified good in its own right, and is being gamed by bad faith actors with stranded assets (coal, oil) to make a point about green power and capital investment money they want.
It's possible no power network could have avoided some of this, but its patently obvious a regulated power utility function needs investment, and the market is not the best model to get it: its the one federal and texan politicians wanted.
A public utility model is not perfect. I argue it would have been better than this, and identified the capex required for systems resiliency before this crisis hit.
The energy market is not the solution. The energy market is the problem.
Honestly, I reach a very different conclusion. Comparing ERCOT to other grids (PJM or CALISO), ERCOT system has delivered very low prices and very high levels of renewable penetrations. PJM wastes billions of dollars a year in capacity payments to coal plants for no reason.
What you write, "The market in power should only exist to optimise" well, that is exactly what ERCOT does.
As for the disaster last week, that was a energy system failure as Texas regulations did not require the natural gas infrastructure to be winterized. Climate change creates more extreme weather events (in all directions but on average warmer) so polar air meant there wasn't enough methane ('natural gas') to power the turbines and heat.
So the issue is the winterization standard in the natural gas infrastructure, but nothing about the structure of the electrical market.
Certainly we need stronger resiliency standards! Events people once thought occurred "1-in-100 years" are actually like "1-in-5 years" in their frequency. And this will only get worse. But that's not a market structure issue it's a standards issue.
If the market solves all problems why would the government even need to mandate winterization? Wouldn't smart businesses have done the risk analysis and done the work? Maybe the problem here is that loss of electrical power has a significant external cost that isn't absorbed by the utilities. In other words, the cost of winterization was more than the cost to fix the damage to their equipment but doesn't take into account the cost to everyone else.
Externalities are, in my opinion, one of the primary reasons for market failure.
Free markets often fail to adopt low cost protections to tail events. E.g. the free market didn't get us 100% of new cars having seatbelts and airbags, government requirements did. And those standards were fought by the car manufacturers.
My point is we need regulations to mandate our energy system to be resilient to outlier events (heat/cold/flooding/high wind etc.) and that's a government function separate from the free market structure of ERCOT and actually upstream of the market ERCOT creates.
Said differently, I don't want people to critique ERCOTs market structure (a huge success) when the real issue is the government resiliency regulations in Texas (a huge failure).
> Free markets often fail to adopt low cost protections to tail events.
Especially when they can foist off the costs of black swan events onto their customers, investors, insurance, and/or the government. In the mean time, they will optimize for profit in the average case.
I can't think of a reliable mitigation against "heads I win, tails you lose" such as seen in a privately owned rent-seeking utility, but clearly the existing system is going to fail more and more.
There are certainly valid criticisms of government operated public utilities, but in places I've lived under their umbrellas there weren't any life-threatening fiascos due to under-investment in expert-recommended tail risk mitigations. Maybe the operating cost of power / water was more than elsewhere, but I didn't notice (or have the ability to shop around).
A market approach may be to let utility customers buy service with a distribution of costs including claw-backs if there is a utility failure. Such a contract may incentivize utilities to install whole-house UPSs for customers who have a "$500 per hour of downtime" service contract. One can imagine the government mandating that in exchange for the last-mile monopoly and access to customers you must offer a full range of SLAs (ranging from a griddy-like "you pay for wholesale price + vig" to "you pay more but have a fixed cost but may have service interruptions" to "you pay substantially more but get clawbacks if the utility fails to meet delivery SLAs".
Likely over the next decade we'll see a continued 3rd worldization of more public goods such that those who are wealthy can just buy a powerwall and those who aren't will freeze / boil every 8-15 years.
A less markety approach is to operate the utilities as a quasi-government (IE not-profit seeking) organization with clear goals and governance; such things have worked in the past and also failed in the past and lots of fair-weather zealots will complain that it is government overreach.
There is every reason to predict that we will continue to send the cost of failure to the government/taxpayers and send profits (plus what should be normal infrastructure upkeep) of normal operation to whoever is well enough connected to operate the utility.
I don't see how the free market could have ever succeeded here. Even if it somehow accounted for events of the last week: the lost lives, damaged properties, and economic impact, it was billed as a once-in-100 year event.
Which company is going to take a hit to their profits each quarter so they can prepare properly? The companies who don't will be more competitive and successful right up until a freak event actually occurs. And if that happens, the absolute worst case is the your under prepared company goes under. Unlimited upsides and very limited downsides.
I agree with your point, but want to point out that this last happened in 2011, and before that in 1989. Certainly not a 100-year event, and likely to become more frequent.
What if I've got a prepper bent and am OK with losing power for a few days in a 1:100 year event? Can I still get cheap, slightly unreliable power?
Not to make light of the events in Texas - it sounds scary and they need to be prepared for next time. But the answer isn't automatically "they should have had a gold plated the grid!". The answer might be "they should be have been prepared for a few days without power in extreme conditions".
Every new 9 gets added to 99.9...% reliability figure costs a lot more than the 9 before. At some point, it is more effective for rare events to be handled on a case-by-case basis.
Your personal value for reliability isn’t relevant. The electric grid is providing power for hospitals with back up generators and office building which don’t. The value of each of those 9’s to society and the overall economy is what matters and business being forced to shut down lose vastly more money than it would cost to prevent this issue.
The market based solution is to add a very large fine for blackouts on a per customer bases. Grid operators can still select how many actual 9’s they want, but the externalities for doing so are priced in.
They are relevant. The electrical utilities could load-shed based on priority, so that places that need highly reliable power pay more and get special guarantees. Technically infeasible on a house-by-house basis, but they could do it for hospitals and such. They probably already do.
Your solution will cause power prices to go up. I'm sure a lot of consumers would be happy with that trade, but why should the ones who are unhappy with it be dragged along for the ride? There is no need to force the grid to provide reliable power to people who won't pay for it.
This is a week about every 10 years best case, right now, where I’m at (near Austin). We lose water for twice that long every 5 years. The reliability is probably less than 99% for power, and 95% for water.
We had a boil water notice that lasted for a couple weeks after bad storms just a year or two ago, and now this one. I don’t think we’ve had power issues like this recently.
Based on what I've read, my understanding is that the separate Texas grid and ERCOT exist because Texas politicians wanted (and still want) to avoid federal regulation. The parts of Texas that were not on the separate Texas grid, i.e. El Paso didn't lose power.
Are you saying that the rest of the US does not have a power market with appropriate regulations? Because as far as I can tell, this crises could have been completely avoided if we didn't have our own isolated grid.
As far as I can make out, this narrative is simply not true, at least not with regard to power generation. Texas is subject to the same NERC regulations as the rest of the U.S. and Canada.
> One example of how Texas has gone it alone is its refusal to enforce a “reserve margin” of extra power available above expected demand, unlike all other power systems around North America. With no mandate, there is little incentive to invest in precautions for events, such as a Southern snowstorm, that are rare.
If the externalities are on the national level, and the fed was seeking to regulate and own the responsibility, whole texas sued to foist them off, who has responsibility for the externalities?
Did he count all the deaths caused by fossil fuel plant particulate emissions and all the future deaths caused by right wing extremists using deadly force to stop migration to rich countries?
I don't think anybody said the market solves all problems. It's completely possible to have a free market with some regulations, you just say that to participate in the market you must meet certain reliability standards, like being able to withstand low temperatures for a long period of time. Private businesses can count on being bailed out when once in a few decade disasters happen (which makes some sense, imo, since it's not efficient for each business to prepare for disasters), so the only way they will prepare is if they are required to.
Many people do, in fact, insist the free market solves all problems. Many of them are in public office, many of them in Texas.
In practice, there is nothing your typical free-market evangelist likes better than a government-subsidized monopoly, but preferably without any pesky regulations.
I generally agree that externalities are a common cause of problems from free markets, perhaps the most common.
But I would suggest that free markets generally create good outcomes, and when we identify bad outcomes we should correct the rules of the market.
In this case, it probably would make sense for there to be a penalty that providers had to pay if they failed to deliver service after it was committed.
My understanding is that the people who put the market together expected that the huge rate increase which would accompany an unusual storm or other peak demand event was expected to be sufficient incentive for providers to harden their equipment so that it would be able to cash in on those peak rates.
This event showed that the incentive is not enough for events that are extremely rare. It also showed that a lot of the supply infrastructure to the gas plants failed, and hardening that infrastructure is really up to the producers who aren’t directly part of the energy market.
So regulation to increase preparedness standards for gas plants supply infrastructure might make sense. But it may be possible to accomplish the same thing more efficiently via fines and penalties for market participants who go off-line during severe weather.
My point is simply: the market itself isn’t really the problem, it’s creating the right set of incentives and regulations around that market.
One last thought: living in Austin and having lived through this whole ordeal (still living it), I can’t say that I would necessarily want to pay twice as much for energy every single month to avoid one crappy week per decade. I’m thinking that I could probably get myself a backup heat and power source, and do some winterization on my own house that would be more valuable to me than paying twice as much for “the grid” to be upgraded to handle events of this rarity. I admit, we don’t know if these will become significantly more frequent due to changing climate, and that makes the decision more difficult, but I don’t see it as flat out wrong that a significant natural disaster damaged the power system, nor do I think having an “invulnerable power grid” is necessarily a realistic or achievable goal.
I haven’t done the analysis myself, but I highly doubt winterization would double the cost of energy. It’s probably some small portion of the capex to build the plant in the first place. Would you pay an additional 5% or 10%? Probably, especially if you get to avoid your home being flooded by burst pipes, rendering it potentially unlivable for much longer than the week of power outage.
"But I would suggest that free markets generally create good outcomes, and when we identify bad outcomes we should correct the rules of the market."
the big players in a market are the ones who "correct the rules of the market", or in other words regulatory capture. so go ahead and identify bad outcomes and solve the problem with new regulation proposals until you're blue in the face, without power it's just people posting online. as long as actual regulatory power is concentrated in a few people, the regulatory capture is easy, and any discussion about it is a pastime.
Living in Austin myself, I agree completely. A little bit of resiliency is better than large increases in power costs. As it is the mass-migration into Austin is driving costs up for low-income families and fixed-income elderlies here. Driving up their power costs further is another hit they don't need. I'd rather see the city spend some of the property tax windfall they are having helping low income get some resiliency and improving the cities ability to respond to the rare events.
Free markets seem to do a bad job with resiliency. Redundancies, winterisation, warehousing N95 masks just in case, etc is treated as inefficiency by a free market and eliminated.
These aren’t externalities - is there an economics name for this? I’m sure it’s been noticed before.
Free markets do account for huge shortages, but we’ve eliminated the motivation for actors to do something about it with anti price-gouging regulations.
There would be tons of stockpiles if businesses could appropriately upcharge when there was mass panic buying. Instead we stupidly lock prices, which wipes out most of the point of paying extra storage costs compared to a just in time competitor.
The problem is we’ve as a society don’t like when prices go up with demand so we’ve crippled markets in their ability to deal with these types of events.
I don’t think what you’re saying jives with the reality of what happened in Texas. The price of electric and natural gas skyrocketed during the shortage. A company that winterized their equipment stood to make a killing. And yet, despite the massive profit incentives, large swaths of Texas were blacked out due to lack of preparation. Besides that, the economic damage of the outages far outweigh how much winterization would have cost. The power companies are unlikely to bear the burden of that. All together, that’s not a good recipe for a pure free market system.
People also find the idea that only the rich can afford to have heat so that the pipes in their walls don’t burst distasteful.
For context, the cap is nearly 100x the normal price. In colder states power companies manage to be profitable at around the normal price of electric in Texas. The price of winterization isn’t that high, and a company that did it could have made a year’s worth of profit last week. The cap was very high and did not contribute to the outage.
In your other post you say this is a once in a century event. It really isn’t. This is the 3rd time since 1989 that Texas has had outages due to insufficient winter prep. It’s more like a once in 10 years event.
there is also another externality, due to perception (regardless of whether it is true) that it affects non rich people more means that it build distrust. trust (and in particular systemic trust, e.g. rule of law) reduces transaction costs; i.e. you can rely on others to do their job properly without having to continually monitor them and build in unnecessary contingencies.
There is no way it would be effecient to perpetually store 1000X your regular demand just to upsell in an unprecendented crisis, regardless of price gouging policies.
This is true, but it would be just as true whether you did it in a free market or through some government program because the inefficiency comes from having to make and store that stuff. A free market just gives us more ways to quantify that inefficiency.
This is super predictable behavior in storm areas like Texas. Hurricanes come, everyone goes for gas, places start to run out of gas, nobody can raise rates, they run out of gas. Even a double normal price could easily pay off a much larger tank.
This is a fringe event. Large scale grid storage is at least 10 years away. It's not a market failure. The irony is that all the complaints about grid storage will disappear once we have it because running a grid without grid storage will be considered insanity by that point.
The technology isn't there. The real solution would have been to cut demand to non essential uses.
I don’t see how that is a technology problem. The technology to run power grids that are resilient to cold temperatures exists, otherwise Canada, Alaska or any northern country wouldn’t have power. It’s just expensive and any player investing into cold-proofing their grid would have been priced out of the market in Texas long ago.
Yes. And then the incentive will be to buy up all available capacity and create artifical scarcity.
If you believe that we are dealing with profit maximizing actors then this is the likely outcome in the absence of any price control.
Lets say you believe that a competitor may come up to provide the service as soon as the price becomes attractive. Power generation is not something that can be stood up (at least not yet) at the drop of a hat.
There are far better solutions to this problem and they all involve more and not less regulation.
> And then the incentive will be to buy up all available capacity and create artifical scarcity
This makes no sense. Which market is it you think can be cornered here? Someone buying up all of the natural gas in the world? All of the generators? What?
The thing about market prices is any time someone tries to corner a market and drive up prices, it incentivizes more sellers to enter the market.
If you’re talking about small periods of time, like cornering it for a week, that’s not really easy considering futures traded against this market would smooth the price like they do for every other commodity.
Same thing applies to oil, oranges, natural gas itself, coal, refined copper, etc.
There is nothing special about electricity other than the fact that people feel entitled to have it at all times and cheaply despite the fact that generation costs vary widely.
> There are far better solutions to this problem and they all involve more and not less regulation.
The California power system is a bastion of regulated electricity and it’s an unmitigated disaster. The prices and reliability are worse than the one in Texas. You just don’t notice because the fallout (other than burning down half of the state) doesn’t freeze people to death.
You'd need to make a strong argument to convince me that situation would actually be much better than the one we have currently. At least with the current price-gouging laws, we're able to semi-select for the people who are willing to spend the most time pursuing goods, which has a much better correlation with actual need than who's willing to spend the most money.
Furthermore, I'm not entirely convinced that removing price gouging laws would really prevent these sort of events. Capitalism has a tendency to optimize for the short term, and to select for firms that are perfectly optimized for the current environment, however unrepresentative that may be. Sure, counterculture firms exist, but there's rarely enough of them to make a big dent, and the markets often remain irrational longer than they can remain solvent.
There seem to be two cases. Rare, but on human scales regularly reoccurring disasters (hurricanes in the east, fires in the west, etc ...) and more-rare "black-swan" events, basically 100+ frequencies.
The more regular disasters seem to be dealt with in markets. Insurance companies will have requirements to reimbursement, some companies will stockpile goods, multi-region firms will have DR plans etc. Alternatively governments regulations can require preventative measures and have stockpiles in place. In practice both happen to varying degrees of success. Price gouging allows for more inter-region support on a for-profit basis, but probably also disincents some charitable actions. On net we probably should allow "entrepreneurial gouging" (like a guy buying a water truck in a non-disaster area, driving it to a disaster area and charging high prices) It might be distasteful, but if it is providing net-benefit of otherwise unattainable resources that is still better. But companies organizing and planning around this, seems much more sinister. Like the water company charging more for potable water, rather than spending their time and effort fixing the system for everyone. That type of thing is probably better prohibited and regulated.
But the more rare events, nobody seems to handle well. Governments and private enterprises alike tend to only prepare for the last crisis. I'm not sure there is a government vs private comparison, so much as a human failure. I suspect good government regulation is going to be better, because it can sustain longer-term initiatives, but getting the policy to be "good" and not corrupted by grift is difficult, especially with out the feedback loop of reality.
The problem is that markets, controlled or free, are at a level of complexity far beyond our capacity to effectivel control from a top down perspective, there have been countless examples with top down legislation have had unforeseen consequences (or overtly controlled markets in Soviet Union). The idea with free market capitalism is that as much as possible the transactions/pricing between parties should allow for systemic optimisation.
There are two main problems, a) not all transactions are captured appropriately, b) we fuck with the system from a top down perspective so much as to completely undermine the premise of the low level optimisation. Oftentimes it's in relation to (a) that we do (b), in (b) we should be aiming to provide recompense to the side of the hidden transaction via the government; unfortunately the government oversteps here and tries to optimise the system themselves.
Vertically integrated government owned and operated utilities have imploded too- notably Ontario hydro failed due to costs related to their nuclear plants, and the rate payers had an extra line item on their bill - $10/mo? - for I don’t know how many decades to pay down the stranded debt.
I don’t think markets are the right tool for electricity generation transmission and distribution - too much coordination is required between the different functions, central planning optimizes the outcomes, and the lead times are so long on significant projects that a high $/MWh for a week in 2021 isn’t going to result in a new nuclear plant.
There are natural monopolies in distribution and maybe transmission as well.
100% regulated even if there are private players is the way.
The Chinese model is pretty spot on. Just let the government own voting shares in private companies. The question isn't whether public vs private is better, it's about how to harness the best parts of both. You want the government to step in and prevent unfair and counter productive behavior and you want the private company to run the infrastructure as efficiently as it can.
This would have gone a lot better if you'd said "the French model", or even the "British pre-1970s model". China is a country without a free press; it may appear effective but it's also highly corrupt.
Externalities are, in my opinion, one of the primary reasons for market failure.
This. Amongst other reasons (market distortions, gaming, profit incentives which misalign to the actual role of the markets target service)
The demand pricing thing, is entirely sensible inside the construct of market for energy. But, the system itself demands both load shedding and load returning and has transmission system dependencies. Price driven load shedding can (if understand it correctly) drive more things off-line when you need to keep the, online.
It's cascading failure stuff. But, not everyone's bidding model is tuned to optimise the overall goal of delivering power.
My conclusion of modern "free markets", as you crank the iterations of the, uh, market simulation, will result in cartel or monopoly. That's what practically all markets have collapsed into if there is any degree of entry cost due to technology or infrastructure.
Also, I've noticed a HUGE drop in that term from the various GOP politicians that used to parrot that daily back in the 80s/90s). That leads me to consider their monetary overlords (I'm not suggesting the other side doesn't have them, just that the GOP is a bit more eager to directly funnel their sponsor messages) DON'T want free markets, because they all have won free markets.
Which is really a bad state of affairs.
I've also realized that money in politics is way up in the same period, and regulation to allow more money into politics has risen at the same time. Monopolies get more ROI on lobbying to help control their monopoly market positions, and keep antitrust at bay.
It's tough because free markets result in predatory pricing in times like this. Heavy regulation (especially these days, see above with money in politics) is highly resistant to change and not necessarily reflective of the common good or even "reality" or even physical laws.
Anyway, Texas is modern america: a rapidly failing government, and a rapidly failing economic system, all being undermined by steady shadowy corruption that doesn't become apparent until a sudden external stressor appears.
> Wouldn't smart businesses have done the risk analysis and done the work?
That is complicated. How do you validate costly infrastructure changes that are only testable or necessary once about every 10 to 20 years? Proving winterization for Canada or Wisconsin weather is challenging if you rarely have Canadian weather extremes.
Apologies - I misunderstood the intent of what you wrote. For testing would it not be possible to use modelling instead?
E.g. in the way that you might fire drill recovery from a nuclear reactor instability without first melting part of the core.
Or how you might test a martian lunar rover before sending it off to Mars.
Even if modelling the entire system wasn’t possible with sufficient fidelity, why couldn’t you replicate the system in a geographic environment with the requisite conditions?
It optimised against resiliency and the state oversight did not capital invest. If the market was meant to ensure resiliency it failed. Now, the green sources are being blamed by AGW deniers for causing the outage, and the coal and oil baseload story is back on the table.
A free market approach also places focus on the wrong performance indicators. Why is “very low cost” even a consideration when it leads to under investment which in turn results in significant power outages for significant periods of time.
The low cost of delivery is irrelevant if there is a strong chance that I’ll freeze to death because my service provider tries to be efficient and profitable instead of trying to be 100% online.
I understand the desire to avoid waste and inefficiency, but free market approaches tend to ignore the human factors and prioritise the financial. That’s not the correct.
There's lots of ways global warming could lead to colder winters.[0] For example, the temperature differential between Arctic and mid-latitude air normally keeps the polar vortex contained. As this differential decreases, however, the polar vortex becomes less contained. As such, the maximum latitude reached by the jet stream increases with the Arctic's temperature. This creates colder weather in some places. [1] [2]
As unintuitive as it sounds, global warming can lead to colder temperatures. It is up to people who disagree with this theory, not its proponents, to prove their case.
"
The polar vortex is coming—and raising the odds for intense winter weather
In the stratosphere over Siberia, temperatures recently jumped nearly 100 degrees Fahrenheit, shoving the polar vortex off its North Pole perch."
This article is very good at talking about what we know from SSG. It has nothing to do with carbon.
You have to be trolling. I just read those articles you sent me and they agree with what I am saying. Carbon causes slow and gradual warming but their are still natural cycles that 'cause the snow that skepics get so worked up about'.
I said co2 does not cause cooling. Nothing you provided even mentioned that. The only thing was from the first article 'scientists are looking into it' related to co2 causing cooling.
Rising CO2 puts more energy into the atmosphere. That means more extreme weather. This has been understood since at least 1980.
Here’s a report from the American Petroleum Institute from 1980 that correctly projected the economic impact and timing of current extreme weather events.
In some other comments you say the science is still an open question.
The projections in this report have been refined and confirmed repeatedly by dozens (if not hundreds) of independent research groups for the last 40 years.
At this point, I cannot imagine more definitive evidence that the science is settled.
'That means more extreme weather. This has been understood since at least 1980.'
The article you provided spoke nothing of extreme weather. It only spoke of average temperature rise.
Temperature rise is not in dispute.
I like the more energy in the atmosphere theory, this would mean events like the suns poles flipping last year or solar events causing ionisation of the poles would also have the same affect increasing energy. Or even that magnetosphere of the earth has decreased by 6%. Which blocks cosmic rays and solar storms. Leading to more clouds being seeded.
It is not proven co2 causes extreme cold weather. It's a hypothesis.
Climate change leading to temperature extremes in both directions is an open question within climate science. There are some theories suggesting this is the case and there are skeptics of that theory, but if you've proven otherwise then you should probably submit your research to them.
I feel the burden of proof is in the new theory, rather than - here is a hypothesis, prove its wrong.
It's pretty clear in the small scale studies co2 concentration affects temperature in the direction or warming in the long term and the short term affect of cooling because less energy makes it to the surface. (Similar to clouds or smog/ smoke blocking light)
This article is referring to the effect of a class of compounds called "aerosols," which does not include CO2. Aerosols do prevent some fraction of solar energy from reaching Earth's surface, but this is separate from the effect of increased CO2 concentrations.
Aerosols are human emitions, carbon heavy pollution being a order of magnitude bigger than the others. The carbon heavy aerosols turn into co2.
When I was in China I experienced this first hand , it was super hot summer weather very very high pollution. Over night their was freak rain the must of cleared the air because it was the bluest sky's I have ever seen. This tropical weather suddenly because the coldest I have ever been. The pollution acted like a blanket trapping the warmth. With that blanket gone, I had to rush to the store and buy a large winter jacket.
I reread your comment and we may be disagreeing on terms.
I suspect we're strongly agreeing. My point is that Texas didn't assume the 'weather' would ever be bad. So when it got cold they ran out of natural gas to run their electricity system.
The reason I bring up methane is that's the raw fuel they need to power their generators. And my proposed solution is to require the energy infrastructure (here the natural gas infrastructure, which is required to power the electricity infrastructure) to be designed to handle bad weather. As you said 'weather' means in gets both hot and cold.
I just get bothered when see co2 makes things cold, its almost absurdist joke ie the one thing to nullify a hypothesis is now incorporated into the hypothesis to strength the argument.
I don't know anything about Texans, I don't even live in America but American politics trickle down
If you're question is 'why can increased CO2 lead to colder weather in Texas?'
There's a huge difference between describing average temperatures (what people describe as 'global warming') and describing the temperatures on any specific day.
Previously, a strong jet stream air current trapped cold polar air far north of Texas (which is say 30' North latitude). As the pole's warm, the jet has become pone to weakening allowing cold polar air to move very far south e.g. 90'N to 30'N in Texas, which sits east of the rocky mountains in the US.
Effects like this are why a lot of people are using the term 'climate change' more frequently. Because an increase in CO2 means more than just an average higher surface temperature. Weather changes and instabilities will grow more common, with a bias to warmer events over all.
Think of it as the 'variance in the weather' is growing along side the mean weather (temperature) is going up.
Yes, as an American I'll agree our politics has plenty of instabilities as well.
It's not "co2 makes thinks cold", but there is a real possibility your previous statement that a "trace element" can't affect the jet stream is certainly up for debate.
A large factor in the strength of the jet stream is the temperature differential between polar regions and lower latitudes. It's well known at this point that polar regions are warming the fastest, so there is a smaller differential, and the hypothesis goes that this can weaken the jet stream, leading to more events where the polar vortex dips down much further than normal.
This is a great article explaining that hypothesis: https://www.washingtonpost.com/opinions/2021/02/18/texas-pow... . Note the author of the article actually thinks the evidence for that hypothesis isn't very strong, but believes it's certainly possible and that its proponents are arguing in good faith.
The only way to exclude the market from the equation is for the state to have total control over the entire energy pipeline, from pulling natural gas out of the ground to the power plants to delivery.
You can't simply mandate that energy prices will be a certain amount if the power plants still have to buy natural gas and other power sources from the free market. If you tried, the power plants would simply shut down when it wasn't profitable according to the legislated rate, making the problem even worse.
If you tried to legislate that power plants or energy producers must sell energy at a fixed cost no matter what it costs them to produce and they can't shut down, they have to price that risk into their long-term model. You're now paying more for the same service just to make it worth someone else's while to take the risk.
The energy market at least provides a feedback loop to large, energy-consuming businesses. Large consumers of electricity like manufacturing facilities will simply decide to shut down when energy prices are too to be profitable, and wait for the cost to go down. You don't see this as a homeowner, but there are industries that adjust their schedules around energy pricing.
"You can't simply mandate that energy prices will be a certain amount if the power plants still have to buy natural gas and other power sources from the free market."
You can and that is what California did[1]. It lead to large scale blackouts, the first bankruptcy of PG&E, the successful recall of California's governor Gray Davis, and brought to light Enron's crazy company culture which lead to its bankruptcy.
The electricity prices in Germany are growing faster than the cost of electricity. It's a counter productive tax structure at work, not a failure of renewable energy.
I could argue that there isn't really a market as the Texas grid is (almost fully) isolated from the rest of USA.
The first change should be a federal law that all electric grids in USA are well connected so there is one big market place and Texas would be able to get electricity from other states.
To avoid such outages in the future, Texas needs to build more nuclear reactors.
No other source of energy is weather-independent, can store fuel supplies for several years on site, is emission free and extremely high capacity factors.
> No, unreliable power sources such as wind, solar and gas are the problem.
> Except for a short outage due to a sensor failure, the four nuclear reactors have been steadily supplying electricity.
> […] To avoid such outages in the future, Texas needs to build more nuclear reactors.
From an article I've read the other day:
> “This is a perfect example of the need for reliable energy sources like natural gas & coal,” tweeted U.S. Sen. Steve Daines, a Republican from Montana, on Tuesday.
> In reality, failures in natural gas, coal and nuclear energy systems were responsible for nearly twice as many outages as frozen wind turbines and solar panels, the Electric Reliability Council of Texas, which operates the state’s power grid, said in a press conference Tuesday.
> No other source of energy is weather-independent, can store fuel supplies for several years on site, is emission free and extremely high capacity factors.
No other source of energy has the potential of devastating a region’s water supply and killing thousands with cancer after one earthquake, desigj flaw or incompetent engineer having a bad day.
I seems to me that the owners of natural gas fired power plants in Texas are being incentivized to find a way to store a few days of natural gas on site, and winterizing that storage, so they can win the lottery the next time things freeze over.
[edit - back of the napkin math]
Extrapolating from https://www.eia.gov/tools/faqs/faq.php?id=667&t=3 it looks to me like it takes about 8 ft^3 of natural gas for 1 kwh of electricity. So, to run a 1 GW plant for 24 hours would take 192,000,000 square feet... a cube about 575 feet on each side. That's a huge tank farm.
Reading about natural gas, it sounds like storage in underground natural geological pockets is common. And also in tanks, but liquified/LNG which is 600x more dense.
As for coal, it sounds like they already typically receive coal in 120 train car shipments daily which is close to your 12000 ton figure. I imagine keeping lots of spare train cars around isn't a big engineering task.
>I imagine keeping lots of spare train cars around isn't a big engineering task.
The solution I've seen in person is the "coal pile", with Caterpillar bulldozers on it, keeping the surface from combusting, and moving things around. They are proven simple technology, and work in winter.
Keeping the coal in the train invites disaster, as rail infrastructure has issues with icing conditions.
Point taken, though disaster might be a strong word. It sounds like the net result is up to 20% of the coal sticking to the sides of the car. And there are ways to reduce that.
As someone who just went 6/7 days the past week without power, I'd love to incentivize them via rigorous government regulations requiring winterizing. Just to be sure they're properly incentivized.
I was not sure I was reading the map correctly, but it is true. If you rushed to get a power plant online because they were begging for power and offering $9k/MWhr, they are now charging you $30.
http://www.ercot.com/content/cdr/html/20210220_real_time_spp
I ask because I broadly understand ERCOT to have delivered the lowest prices and the highest reliability over the last decade. A far better outcome than PJM or CALISO.
Last weeks failure was because the natural gas pipeline infrastructure isn't winterized - a separate issue from the structure of the electricity market.
They may have delivered low prices, but it was at the cost of ignoring handling “black swan” events. As the ERCOT CEO said, If they had not blacked out millions of customers, grid and consumer equipment would have been destroyed - wiping out all the accumulated cost savings.
ERCOT does not pay producers for standby capacity. Just this week the New England grid completed its annual auction for capacity to be available 3 years from now. The prices they will pay are between $3-$5/MWhr. Maybe a little more than electricity in TX in 2024 (but who knows). No power plant operator is going to hit the $9,000/hr “gusher”, but it will be available and they will get paid.
Respectfully, I don't see the issue as one of choosing to have a capacity market. There was ample excess capacity (at least 26GWs!), just no natural gas to run it as the natural gas infrastructure was frozen.
So what was the nature of the failure? Well, there was not resiliency standard that required the natural gas infrastructure to be winterized. Because this infrastructure froze, the state ran out of methane ('natural gas') to run it's massive excess capacity.
Now this isn't hard to do, Siberia, New England, and Scandinavia all have massive natural gas infrastructure that's fully winterized. But Texas never required that winterization, so they ran out of actual methane when they needed it most and then the turbines could not turn.
Said differently, the underlying issue is regulatory and 'energy system' one - having a capacity market (like PJM or New England ISO) would in no way have changed the outcome because the state would still have run out of methane.
Is 26GW the actual surplus capacity? My understanding is the number of homes without power that were not part of intentional blackouts would have surpassed grid capacity. This aligns with heating taking more power than summer cooling. It's normal for Texas to have a few blackouts per summer season due to demand.
26GW is the thermal capacity that the market would like have had, IF there had been sufficient natural gas. [1]
And that ERCOT's extreme plan (worst case scenario) had only anticipating loosing [2] 14GW of 'thermal' (i.e. mostly natural-gas) capacity. So 'lost capacity' was 2x the worst case anticipated.
Estimates are that supply was about 20GW below peek demand.[3]
Sources: MIT trained Princeton Professor who was tweeting real time data from ERCOT and is one of the nations leading researchers on energy systems, grids, and reliability.
Yes. If minute-by-minute retail electricity pricing was there, then there'd be a large incentive to winterize the fuel supply, because the ones who didn't would lose out on the profits from higher electric rates from the ones who did.
Aren’t the generators already selling into a spot market that saw a multi thousand percent price increase in this demand peak, and are thus so incentivized? Providers AIUI are not responsible for any physical infrastructure, they’re selling volatility reduction by buying power from generators at spot and and sending it down publicly managed lines to customers for fixed rates.
I buy your point up thread that more responsive retail pricing would’ve reduce demand faster[1], but I think generators just failed to foresee the failure points of their systems and the potential severity of winter events despite significant incentives to do so.
Since the spot price hit its statutory cap, you might argue that the limit on potential windfall profits rendered winterization ROÍ negative - which might be true but if the only way to keep the lights on is to let the generators plan on pillaging a state in crisis, the state might want to step in to provide support beforehand.
[1] leaving aside the point the ‘reducing demand’, in this instance, means poor people are cold or worse.
If the consumer retail electricity rate was allowed to float minute by minute, there'd be no need for "peaker" plants.
The notion of fixed electricity rates is the source of most of the problems.
After all, there are regular events where oil refineries go off like, burn down, blow up, etc., and yet I'm still able to buy gas because the pump prices go up, reducing demand to match the supply.
Note that this big freeze also impacted gas deliveries, and gas prices went up, and no shortages. A fixed pump price would have produced shortages and lines.
Whenever there are shortages, there's almost always a fixed price in there causing the problem.
In general, individual consumers expect sellers to increase the price above the cost of goods in exchange for decreasing the exposure of the consumer to volatility. A case could be made that gas prices violate this expectation, by transmitting sharp price shocks to consumers in violation of the unspoken agreement.
I remember something about how gas prices quite reliably go up rapidly and go down very slowly, which doesn't at all reflect a market that's allowed to 'float'. It seems as though gas prices are building in their own 'fixed' problem: shock-tremor resilience into a very low rate of decline in prices, paired with a very high rate of incline in prices, in order to buffer against market shocks in a way that "boils the frog" so that consumers don't realize it.
Are there any examples of an industry that transmits price shocks directly to customers, with equal responsiveness in both directions, regardless of the opportunity to sellers exploited by gas prices today?
> In general, individual consumers expect sellers to increase the price above the cost of goods in exchange for decreasing the exposure of the consumer to volatility.
Most markets neither have nor want this. If there is a freeze in Florida, the price of oranges goes up. If someone discovers a large new deposit of cobalt, the price of cobalt goes down. If there is a flood in Thailand, the price of hard drives goes up. If a patent expires on a drug, the price of the drug generally goes down.
> I remember something about how gas prices quite reliably go up rapidly and go down very slowly, which doesn't at all reflect a market that's allowed to 'float'.
It's just a reflection of imperfect competition.
If the price they have to pay goes up then they raise prices immediately because there is no point in attracting customers with low prices so that you can sell to them at a loss.
Once wholesale prices come back down, not lowering prices until your competitors do allows you to charge higher margins. But lowering your prices increases your customer volume, so eventually somebody does and then the others have to follow. The fact that this doesn't happen immediately is a reflection of the fact that there are only tens and not thousands of local competitors.
One problem with this is it forms a regressive structure where poor people are priced out while rich people get to keep consuming at whatever rate they can stomach.
It would work better and much more fairly if the floating rate was scaled by the net worth of the customer.
That's completely defeating the purpose of the price signal, which is to cause whoever is the most price sensitive to cut usage. By charging less to the people who are most price sensitive, the average price charged in order to deter usage would have to increase dramatically.
It also creates ridiculous perverse incentives where people with little money waste electricity in the midst of a shortage because they're not being charged the market price for it, forcing cuts in actually productive alternatives.
What's needed is a way to shut off electricity on a per household level based on prices. Consumers set the max price they are willing to pay in an outage. If the price is above that, they get no electricity. Complicated solutions like IoT thermostats limiting max temperatures would be better but the expectation of such a deployment is unreasonable.
You are right it creates perverse incentives, but so does the current system. For instance check this article [0] that shows pictures of Houston's skyline during the recent power outages where completely empty skyscrapers are wasting power while ordinary people freeze.
I'd rather have poor people using electricity than rich corporations. At least keeping people warm is productive.
>I'd rather have poor people using electricity than rich corporations.
Deicing power plants and pipelines requires electricity. If electricity cost is $9000/MWh then paying that money is worth it since you unlock the ability to produce more electricity and sell the additional production capacity you brought online for $7000/MWh. Repeat this with multiple power plants and you are back to $100/MWh.
If you just hand it out to random people you might not have enough electricity to keep the electric grid alive.
None of the skyscrapers in those pictures are power plants or pipelines. Human beings were freezing to death while empty corporate headquarters remained lit up like xmas.
Maybe there should be some reserve power in the system to make sure power plants have capacity to heal themselves, sure. But that's really a tiny part of the overall system.
>You are right it creates perverse incentives, but so does the current system.
Does the current system charge customers by minute by minute spot prices? I don't think so. If electricity costs $5/kWh you bet the CFO is going to tell the janitor to turn off the lights.
The current system allows rich customers to negligently waste electricity that poor customers need to stay warm. If the system prioritized usage and charged the corporations $5/kWh while charging poor customers the standard rate, people wouldn't have frozen to death.
GP's point still remains. Even if you do charge corporations $5 kWh, that's likely not enough to solve the power deficit. After all, corporate offices aren't exactly power suckers (a 1500W space heater is equal to at least a few dozen LED office lights), and the heavy users (factories) are usually the first ones to go when there's a power shortage. Price signals are still needed to ensure that people are sufficiently motivated to change their behavior. Leaving prices unchanged will basically mean consumer demand remains unchanged.
Charge rich people more than poor people. Cut them off sooner. They have bigger houses that use more energy and they have more blankets and supplies. Poor people with fewer options deserve the power more.
I agree with your idea of charging more for higher earners, much like is some northern European countries fines are proportional to income... the photo linked is eye opening, I'd suggest in extreme weather cases like this, corporations should be charged more depending on how many employees/income/profit. Indeed if capitalism is meant to help create a fairer more innovative/dynamic society Corporations shouldn't be represented legally on the same status (as they are in the U.S.) as people...
Capitalism, unfortunately, is not meant to help create a fair society. It is designed to maximize shareholder value based on endless growth and consumption, and that is all it is good at. This is unsustainable both socially and ecologically.
Instead of giving corporations legal status as people, we should be giving the Earth legal personhood. Some countries are already starting to do so. [0]
Here are four countries that have given nature the same legal rights as humans. #BeLikeThem. Solutions are everywhere. Let's implement them and protect people and the planet. #ActOnClimate #nature #forests
Howabout a priority system for how power can be utilized and at what price. Example from highest priority to lowest:
Power plants' internal keep-alive and ignition mechanisms > Hospitals, fire stations, and other emergency services > Housing >>> Corporations
> I ask because I broadly understand ERCOT to have delivered the lowest prices and the highest reliability over the last decade.
Until they didn't. Until any money savings you may have gotten over the last decade was eaten up by what will be the cost of the burst pipes and flooding of your house.
How are ERCOT's prices compared to El Paso's?
> El Paso Electric said they always try to prepare for the future and after a winter storm in 2011, the utility company worked towards replacing and upgrading their equipment. Many generators now have antifreeze protection.
> "We went from plus-10 degrees which was what the original equipment was designed for to a minus-10, so currently everything we install or upgrade is done to a minus-10 degree sustained temperature," said Louie Guarderrama, director of operations for the utility company.
> Until they didn't. Until any money savings you may have gotten over the last decade was eaten up by what will be the cost of the burst pipes and flooding of your house.
Yeah but that's going to be paid for property insurers or perhaps federal disaster relief funds. ERCOT successfully externalized the cost of coping with frigid temperatures, allowing them to provide power at lower prices.
If this happens consistently enough, your insurance prices are going to go up. Disaster relief funds aren't unlimited either, and you can experience significant delays when the time comes to go ask for them to pay out.
That’s great that El Paso got this failure mode right. Are there other modes that they de-prioritized? Is holding them up as a model of success a form of "resulting" [0] since we don't know what counterfactuals in which they would have failed?
El Paso Energy is interesting bc it represents the old school community monopoly.[1] I wonder if the JPM buyout will help or hinder its mission.
I think this is being overthought. Texas suffered a cold-snap freezing the equipment in some parts of the state. The parts that winterized their equipment were able to continue functioning showing the value in such a methodology. I don't see where there is an opening for us to ask more questions of "does winterizing equipment increase reliability when it gets cold".
ERCOT is just part of the GOP-designed grid that has refused to weatherize, even after multiple "100-year events" that happened inside 15-20 years. Now we're burying Texans because a few officials think this is what freedom looks like.
Did were those ERCOT's power plants or ERCOT's companies or was it even ERCOT's purview to tell them to weatherize? Of course not. Does ERCOT serve the same boss as Republicans and energy companies? Absolutely.
I hope that better explains why I hate ERCOT, lest you think everyone who has an opinion different than yours is a fool. I am used to that. Most people have no idea how little Texans care for GOP go-it-alone politics.
Unfortunately, storage of electricity is quite difficult; supply and demand therefore need to be balanced at all times. An oversupply (ie, overvoltage or excessive frequency) will damage equipment, so prices go negative to encourage those plants which can go offline quickly to do so; generation stations which take longer to shut down or start up, on the other hand, tend to stay running.
In the medium to long term you probably want some central management that can ensure extra capacity exists. When you depend on the spot market for everything, this happens, and you encourage an attitude of "yeah you're begging for power but I very likely won't get paid for it so why should I care?".
Gasoline pump prices always retails for the spot price, and no shortages have occurred since 1980 when Reagan repealed all oil & gas price/allocation controls.
This is despite plenty of oil shocks, wars, refinery explosions, the current freeze preventing gas transport, etc. Nobody has reported gasoline shortages in Texas.
This makes the spot prices far more stable, and in case of shortage you don't instantly cripple households. And households that run out can easily get an alternative.
It's a completely different product, so the ideal market is different.
In the 1970s, the feds decided they could set prices and allocate gas far more efficiently than the market. The result was many years of gas shortages and long lines.
Reagan's first act in 1980 was an Executive Order to repeal all of that. The gas lines disappeared literally overnight, and have not returned in 40 years.
I don't buy that anything is fundamentally different about electricity.
> case of shortage you don't instantly cripple households
The point of market pricing is you don't have shortages. The price rises until demand drops to match the supply. Rolling blackouts and peaker plants would be unnecessary with market pricing.
Demand for electricity is very elastic. I'd change my behavior if rates doubled. Wouldn't you, too? I bet you could easily cut your consumption by 50% without any particular hardship. Put on a sweater, read a book instead of watch TV, lights on only when you need them, turn off exterior lights, shorten the time your computer goes into power saving mode, etc.
> I'd change my behavior if rates doubled. Wouldn't you, too?
But most customers want fixed-rate electricity. So in a free market, that's what they buy. The spot market largely only exists for suppliers, and if you run out of suppliers the problems with electricity are vastly harsher than you could ever get with gas.
The combination of market + contracts + consumer preference ends up causing shortages.
I'm not suggesting setting prices or trying to allocate supply. Still have the spot market. But I think it would help if there was also some money that went toward keeping a percentage of extra capacity around even if it's going completely unused and would never make a profit from the spot market alone.
-
Alternatively you could use regulation to force variable pricing onto consumers. That would probably work too.
> But most customers want fixed-rate electricity. So in a free market, that's what they buy.
Not necessarily.
In order to have fixed-rate electricity and not have rolling blackouts, the seller would effectively have to carry insurance (or some equivalent) against unexpected price increases and then use that money to bid at a loss on energy to supply it to customers during a shortage. The price of the insurance would have to be passed on to the customer. The more people who buy fixed-price contracts, the higher the insurance premiums would be, because the higher the variable prices would get when demand outstrips supply and customers on fixed-price contracts don't reduce consumption.
The customer could end up having to pay significantly more, hundreds or thousands of dollars a year, in order to have that insurance instead of the variable rate plan. There is a limit to how much people are willing to pay for a fixed rate.
And it's easy to see how someone could come out ahead by e.g. using that money to buy a backup generator and then disconnecting from the grid whenever variable prices are high.
> And what they got was no electricity when they needed it most.
Yes. And what I'm saying is that it's a natural outcome of having a market.
As far as I can tell you're arguing for "market pricing" but arguing against government interference in pricing, but I don't think you can have both of those at the same time.
If the government doesn't intervene, most people will buy fixed-price electricity contracts instead of market-priced contracts.
If you want the average person to avoid blackouts in a situation like this ('like this' meaning no huge grid overhauls), then you need to ban fixed-price electricity contracts.
> Some did buy the variable plan. They had electricity (although at a high price).
Are you sure? As far as I'm aware the outages were a function of location, not what type of plan you bought.
There is absolutely no possibility that the decision to black out a particular neighborhood was made based on the energy plans that individual houses were on. The fact some people on variable price plans had electricity is completely unrelated to that - their neighbours also would have had electricity.
Or did they cut neighborhoods without hospitals first? Is it possible some customers with spot pricing plans lived in the same neighborhood as a hospital?
They didn't cut power to neighborhoods with a police/fire station (I have a friend in Texas who wondered why his power didn't get cut). I don't know about hospitals. But hospitals usually have their own emergency generators.
BTW, the power to my house can be remotely and individually shut off any time the power company wants to (when they upgraded my meter). There's no reason this can't be used to shut off the fixed rate customers and leave the variable rate ones on.
> Market pricing is prices not set by the government. By definition.
If a fixed rate contract counts as market pricing, then market pricing doesn't solve the problem.
> That's speculation. Even if true, it would be their choice.
It's their choice, but if enough people choose it then we run out of power.
> They were being portrayed as victims in the news because of their high bills. Having a bill means they had electricity.
Some of them had power, just like some people paying a fixed rate had power.
That doesn't mean that having such a contract gave you notably better odds of your power staying on. Even if it changed neighborhood priorities, that only gives you a very slight benefit for picking that plan.
> If a fixed rate contract counts as market pricing, then market pricing doesn't solve the problem.
It will when people realize it means they won't suffer blackouts.
Currently, Texas doesn't have a fully market based system. For example, a market based system wouldn't shut power off to neighborhoods, it would be granular to the customer. But it takes time to evolve from the old system of government fixed prices.
I would also expect a market system to offer fixed price users an option when there's a supply crisis - go to a variable plan or get shut off.
You can have a system that reduces power use with blackouts, or one that reduces it by price.
Or you can have a government run system at a fixed price that is far higher, because you'll be paying for an inefficient government operation with all kinds of extra capacity and have peaker plants available at a moment's notice. Besides, that's also the least environmentally sound system.
If you can manage to have per-customer cutoffs, yes that would solve the problem.
I was talking in the context of what could help with the current grid design.
And heck if you can get even a fraction of that improvement in controlled cutoffs, then you can avoid this kind of blackout even without anything else. Because it would actually be possible to roll the blackout and only have people lose power for a few hours at a time.
In most disasters for which gouging laws would apply, won't the gas stations still run out even without such laws? The gas stations usually run out because the disaster stops transportation into the disaster area so the gas stations can't get resupplied.
The argument goes that if prices were unbounded above, demand would drop, and suppliers would move heaven and earth to deliver more to take advantage. No one fills their tank ‘just to be safe’ if the gas is $50/gallon; if they really could charge $50/gallon the oil companies would have private road clearing crews and tanker trucks outfitted like storm chasers? I don’t know.
While such a policy might maximize economic utility I think you’re correct that it’s advocates gloss the obvious physical - but also social - constraints.
Sometimes gas (or whatever) just can’t be delivered for any price. Since demand obviously drops off with price, it’s hard to believe suppliers could justify mammoth investments in delivery infrastructure.
More importantly, such a policy means rationing a essential resource proportional to wealth. Those with the most get what the need; the well off get a little at a painful price; those struggling under normal circumstances just go without. The argument does that a little at a painful price is better than none at a artificial price. I think that misses the size of the lattermost group, and the risk that expressing a fundamental inequality between humans during exigent circumstances - that if you don’t have money, you can’t have gas or heat, or whatever it is - puts social cohesion in jeopardy. Rationing resources either
by explicit (1 gal per customer) or implicit (first come first served) policy might be economically inefficient, but socially expedient
Rationing and anti-gouging laws prevent supplies rushing in. A lot more people suffer as a result.
Rationing is particularly stupid because then the supplies are not going to those who need it, they are wasted on people who don't need it. WW2's gas rationing created a thriving (and very illegal) black market of people selling their gas rations they had no use for to people who did. A whole crime industry grew up around this, complete with drive-by shootings.
So how can you get the benefit of price-surge based supply without the social-inequality disruption? Minumum subsidized purchases (like first gal costs low-$, more at market rates)? Direct-to-citizen cash payments? "Community based purchasing" - local towns buy what they need, at market rates, but they get massive federal cash influxes to enable them to do so? I'm sure I'm missing something here, but probably there is some mix of tradeoffs that could bette make this kind of thing work.
What happened before the gouging laws was random people would fill 5 gallon jerry cans with gas and drive into the disaster zone and sell it out of the back of their pickup. They'd do other supplies, too. They'd appear on the scene almost immediately, sometimes days ahead of government relief.
But the anti-gouging laws put a stop to that, and now people are forced to wait for government relief.
Governments should always be considered a provider of last resort. They are absolutely necessary, you can't talk yourself out of that, however this should never prevent the existence of a private market that can respond faster.
The primary advantage of markets is that they excel at providing value very efficiently. The downside is that they service the most profitable customers first so in fringe cases there will be a large segment of people without service.
The primary advantage of governments is that they can afford to be altruistic and ensure fairness. However, they are inefficient and slow to respond, meaning they will not solve the problem to a satisfying extent and only do the bare minimum.
If you do both you get the best of both worlds. Those who cannot afford private service can wait for government relief. Those who cannot wait for government relieve can pay for private service. The private market keeps the government in check, the government keeps the private market in check. They cover each other's backs.
> you are just shifting first in, for biggest wallet
Not shifting because there's no supply. The mosquito fleet of entrepreneurs driving in to make a buck selling gas, water, food, supplies, etc., disappeared.
Which would you rather do in Texas: watch your house slowly freeze and know you'll have 5 figures in freeze damage while waiting several days for the government to restore power, or buy a generator and a can of gas from a redneck who threw his own generator into his pickup with a can of gas and drove in from the next state to sell it to you for 3 figures?
> it really doesn't help more people
It really does help more people. Before the anti-gouge laws, there were always stories in the media about these people driving into disaster zones with supplies. But the media always demonized them, and so now they're against the law and you get to freeze.
Of course, there are good people who will still drive in and give away supplies, but they're a tiny fraction of the crowd that trucks supplies in to make a buck.
Honestly, this is such an interesting problem. If one were to assume that price gauging laws for fuels didn't exist one would be allowed to think about how to provide this emergency service in the most effective way possible. Uber could just have a new category for emergency deliveries. The government could also take advantage of this service for emergency relief.
The problem with this hypothetical is that there is a non zero chance that generator will cause problems. Worse, if it is profitable, expect cheating and corners to be cut.
Is especially odd, in that a well regulated power market seems to handle this better. Yes, other places had outages. Not comparable in scale, though.
There is also the oddity that similar arguments could be made that you could get medication on the street market. Why would anyone cut corners there? :). Surely, if you are in need, you should be allowed to buy someone else's medication from them at stupid high prices?
Edit: so to directly answer what I would rather do if I was in Texas. I would rather have had risk of failure properly priced into the market such that they were more ready to deal with it.
That is inline with what I was reading. I'm assuming the outage last week was an emergency, so assumed something like this would apply, but I see no evidence that is the case.
Perfect explanation. This is an example of market contango where the spot price is actually below the futures price completely due to the weather event which has triggered a collapse in demand on the grid. And because of the nature of power generation, for many suppliers, it is actually less costly to remain running and sell at a loss than to shut down.
No. Is that your real estimate of an actual Texan who just saw neighbors lose power and water for up to 9 days during a historic freeze? There is a body count of 75, last I heard.
You can see the massive excess capacity which is why pricing has gone negative now, total opposite of earlier in the week, grid may fail now from overload instead of brown out.
I've noticed that happen when browsing from outside the US on many sites recently, including Ercot. Extremely annoying. It's companies paying for Imperva's web firewall ("Cloud Application Security") that just blocks IPs based on country for no reason.
> For wind developers, federal tax credits also are a contributing factor, even allowing the wind resources to make offers at negative prices. However, low and/or negative offers are not limited to any particular resource, and it is not uncommon for thermal generators to submit negative prices to decrease their chances of being dispatched below their desired or capable levels.
> ...
> Market prices tend to go negative when there is low consumer demand and the thermal generators that have chosen to remain online cannot be backed down further to allow the available, lower-cost wind generation to serve consumer demand. In situations like this, some wind generators will be curtailed to balance generation with load. In these cases, since wind is the marginal generation, it sets the market price, which may be low or negative.In 2019, system-wide negative pricing occurred for 58.5hours, or less than one percent of the year.
If your job is to establish a stable market between producers and consumers, and the market price you set swings positive and negative, through 6 orders of magnitude in just 72 hour...you are not doing a good job.
...or, hear me out, this system is far more complex than an armchair specialist from HN can understand from reading a couple of headlines, and the actual experts in this subject matter are doing everything in their power to make the system work as best as they can, balancing a zillion opposing forces.
That's a lesson many CS or maybe even all STEM grads have to learn at some point. Especially politics is more complicated than any code you can design.
There is quite a bit of elitism when programmers talk about real-life events but admittedly less here on HN than in many other forums.
The system is complex because Texas designed it that way. This is in no way a technical problem, is it a political problem.
Just because something is complex, it doesn't mean there is no one with the required expertise. Texas chose Ayn Rand levels of deregulation with its energy market, and it will keep struggling with black swan events since those are the types which the private industry tends to chronically underinvest for, since they are the easiest to cut and turn into profit.
Ah yes, the appeal to authority argument. I can’t have anything valuable to say because I am not an authority.
I am sure running a power grid with thousands of producers and millions of consumers is incredibly complex. Did you know every wind turbine and generator is spinning exactly in sync across the whole grid. I am amazed that it works.
What obviously does not work is the libertarian fantasy of live market pricing for turning generators on and off. What are the chances of rolling blackouts on Monday as oil cracking plants come online to take advantage of free power?
So what do you recommend? Mandatory lights/heaters/AC on/off times, so the power produced is actually used, and the power needed is actually produced?
The british have the problem that during a football game half-time, a bunch of people start their tea kettles at the same time, and there is a relatively huge spike in electricity usage... this means, that the electricity providers have to plan for this and import electricity and/or shut down other cunsumers for those 15 minutes. Now imagine an unplanned half-time, without the time to prepare, and a magnitude higher changes, that happen suddenly (eg, three/ice brings down cables)... there's no way to predict everything and deal with every problem.
What variable pricing does is, that it gives incentive to consumers to use electricity when it's cheaper and not use it when it's more expensive. For homes that means washing clothes in the evenings and on sundays (cheper electricity here then) and not during peak usage hours, and for industry that means shutting down the highest consumers when there is not enough power available, and having them use up extra power when needed.
The British have a plan for this and many other things on the National Grid.
For decades they have used pumped hydro to manage this. Paired with a TV in the control room showing Eastenders or the football as appropriate.
That's why the UK has external sources - both inteconnects with other grids, and stored power - that can be brought up in seconds.
My understanding is Texas doesn't even have connections to other grids?
Historically the UK had "economy 7" usage, where domestic electricity was cheaper at night. It's not convenient, it stems back from the end of the socialist era of the 70s where individuals took a backseat to the good of society. Most users only use it to boil a hot-water tank and 'night storage' heaters.
It's a shoddy solution for a problem that shouldn't exist in an advanced economy.
Texas has DC ties to other grids, much like the UK does. The UK also has its own independent grid that isn't synchronized with anyone else, much like Texas (though smaller-scale because UK industry is basically dead and we generally use gas for heating).
It makes perfect sense. When there was not enough power, because generation was frozen, electricity was in demand. Now that those power plants are unfrozen and there is enough power, over-generation is a liability.
The real question is does the spot price being able to go to $9,000 produce a useful market signal? Or is it just a pointless hazard to ensnare the unprepared? Normally this kind of question doesn't make sense because if there are still transactions at a high clearing price someone has decided they're getting $9k of utility. But in this case the market is a post facto settlement system decoupled from most usage, rather than something built on deliberate transactions.
Also, does anyone know who ends up paying for energy usage that cannot be attributed to any specific customer? Like if someone jumps their meter while the spot price is at $9/kWh, does the local transmission company just end up eating that or what?
The PJM market also operates capacity markets, where energy produces are paid for being available to produce energy when called upon. This would be one way to pay people to at least think about reliability, in that they are explicitly getting paid for it.
However, I believe that in the last polar vortex incident, something like 20% of people paid on the capacity market failed to be available. Unless there are steep penalties built into these contracts for failure to produce when needed, there still might not be proper incentive to perform proper design and maintenance.
As we go forward, it will be interesting to see which incidents fall under force majeure, and which incidents result in actually breaking contracts.
This particular incident was foreseen: the 2011 FERC report on smaller similar outages in ERCOT recommended fixes to prevent this. And I know of at least one energy expert who was tweeting days before this happened that he hoped Texas had fixed their problems that were identified in 2011.
Personally, I favor regulating the ever living hell out of it, and having the state force carbon free electricity by 2035. I think that's the only way we will see movement towards more reliability and less carbon: guarantee that there's a market for such products.
I live in rural Texas. Tuesday it was 10-20 degrees here, today was high 60s, tomorrow will be 70s. Thursday I was wondering where to evacuate to if I ran out of propane, today I turned off the furnace because it was too hot in the house.
To think this would not have an effect on energy demand, and thus price, is delusional.
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Likely no. I used a VPN to connect from a Texas server and was able to see the page no problem. Could be a GDPR thing but I didn’t see a cookie popup, so I dunno.
If large negative-price swings, on account of higher power variability, become commonplace it could very elegantly pay for storage. It would also let storage be compared, apples to apples, dollar to dollar, with base load power supplies.
Texas isn't connected to either of the two national power grids (east and west half of lower 48 states, roughly) so that their power system isn't subject to federal regulation.
The other half of what the grandparent said also seems completely completely false. Texas is subject to federal (indeed international) regulation through the North American Electric Reliability Corporation, same as the rest of the U.S. and Canada. I don't fully understand why this is being reported otherwise, though, so maybe I'm missing something.
2. FWIW Texas is kind of an island. There are very few significant population centers near the TX border. Oklahoma City is the closest city, followed by New Orleans and Albuquerque. Plus Texas only has one major city near its own borders (El Paso). There aren’t that many neighbors nearby.
strangely every time i have tried to access the ercot site i keep get an "access denied" error. i wonder if it is because it thinks i am in europe, or maybe some other reason.
I've noticed that happen when browsing from outside the US on many sites recently, including Ercot. Extremely annoying. It's companies paying for Imperva's web firewall ("Cloud Application Security") that just blocks IPs based on country for no reason.
Well it's annoying for we rubberneckers, but presumably not for no reason. If your business literally only caters to people from Texas, why not decrease potential problem/attack/whatever vectors by dropping all other traffic?
My understanding is that electrical markets are physical markets in that you literally have to either provide capacity (electricity) or take delivery (use the electricity) to participate. And you need a utility level power meter (for buyers/users) or to pass a detailed interconnection queues (for sellers/providers) to participate.
The reason prices go negative is federal production tax credits incentivizes wind power producers to be able to bid a negative price and still make money. Said differently, the negative price in the market is outweighed by the positive revenue from the production tax credit.
Am I missing something here about the structure of the 15-min real time power market? I'm asking as I'm genuinely trying to learn more about this stuff.
This link is specifically for real-time market pricing. This is a marginal rate.
Presumably, power companies locked in their pricing using the day-ahead rates yesterday according to their forecasts and risk models. Now there is a surplus of energy production, and it actually makes sense to pay companies to take that electricity out of the grid.
You can see the current day-ahead rates by selecting DAM-SPP from the Select Data dropdown at the bottom.
The negative marginal rates is an interesting phenomenon, of course, but the real-time marginal rates alone don't show the whole picture.
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HelpDesk@ercot.com.
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My understanding is that this was largely deliberate on the part of the state of TX to minimize the impact of federal energy regulations on the TX grid.
The idea being that the federal regulations devise their authority from the regulation of interstate commerce via the commerce clause, but if TX chooses not to participate in interstate commerce, the federal regulations don't have authority to apply to TX.
Not that I know of, but my understanding is that electricity is basically back for everyone, except for some isolated cases where the transmission lines are still being repaired.
can someone give me free money like the ones during the recent oil tanker thing? i was late to the party (timezone thing) and missed out on a lot of cash, darn you physical time barriers
I’ll point out that it’s already 50 degrees in Austin today with a projected high of 70. Plus it’s a Sunday, so many businesses are closed. Plus we just had a freak storm that required a lot of 24/7 industrial operations to shut down, and they likely haven’t powered back up yet since the roads were still icy as recently as yesterday.
TLDR; demand is now very low, and since the electrical supply has to be matched very closely to demand, this is how ERCOT tells plants that can shut off easily to shut off.
It's possible no power network could have avoided some of this, but its patently obvious a regulated power utility function needs investment, and the market is not the best model to get it: its the one federal and texan politicians wanted.
A public utility model is not perfect. I argue it would have been better than this, and identified the capex required for systems resiliency before this crisis hit.
The energy market is not the solution. The energy market is the problem.