Clearing price for supplying power to Texas grid

Re: Clearing price for supplying power to Texas grid –$31.65

#51

Post by WalterBright » Sat, Feb 20, 2021, 10:35 PM UTC

Dylan16807 wrote: post #26

bdonlan wrote: post #19

Earlier quoted context omitted.

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 immediate term, sure. 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Gasoline pump prices always retails for the spot price, and no shortages have occurred since 1980 when Reagan repealed all oil & gas price/allocation controls.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.

Re: Clearing price for supplying power to Texas grid –$31.65

#52

Post by epistasis » Sat, Feb 20, 2021, 10:35 PM UTC

mindslight wrote: post #21

asmithmd1 wrote: post #12

Earlier quoted context omitted.

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.

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 s…

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.

Re: Clearing price for supplying power to Texas grid –$31.65

#53

Post by raisedbyninjas » Sat, Feb 20, 2021, 10:36 PM UTC

mrDmrTmrJ wrote: post #34

asmithmd1 wrote: post #29

Earlier quoted context omitted.

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…

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 ('nat…

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.

Re: Clearing price for supplying power to Texas grid –$31.65

#54

Post by mrDmrTmrJ » Sat, Feb 20, 2021, 10:37 PM UTC

Osiris wrote: post #35

mrDmrTmrJ wrote: post #30

Earlier quoted context omitted.

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 wa…

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 ac…

Strongly agree.

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).

Re: Clearing price for supplying power to Texas grid –$31.65

#55

Post by njarboe » Sat, Feb 20, 2021, 10:37 PM UTC

PragmaticPulp wrote: post #37

ggm wrote: post #22

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 mode…

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…

"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.

[1]https://en.wikipedia.org/wiki/2000%E2%80%9301_California_ele...

Re: Clearing price for supplying power to Texas grid –$31.65

#56

Post by Florinator » Sat, Feb 20, 2021, 10:38 PM UTC

PragmaticPulp wrote: post #37

ggm wrote: post #22

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 mode…

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…

I think you've just described Germany, which has the highest electricity prices in the world.

Re: Clearing price for supplying power to Texas grid –$31.65

#57

Post by Dylan16807 » Sat, Feb 20, 2021, 10:41 PM UTC

WalterBright wrote: post #51

Dylan16807 wrote: post #26

Earlier quoted context omitted.

In the immediate term, sure. 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.

It's really easy to store gasoline.

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.

Re: Clearing price for supplying power to Texas grid –$31.65

#58

Post by taeric » Sat, Feb 20, 2021, 10:46 PM UTC

WalterBright wrote: post #51

Dylan16807 wrote: post #26

Earlier quoted context omitted.

In the immediate term, sure. 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.

Aren't there strong controls on how much gas can fluctuate?

Re: Clearing price for supplying power to Texas grid –$31.65

#59

Post by WalterBright » Sat, Feb 20, 2021, 10:50 PM UTC

taeric wrote: post #58

WalterBright wrote: post #51

Earlier quoted context omitted.

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.

Aren't there strong controls on how much gas can fluctuate?

No.

Re: Clearing price for supplying power to Texas grid –$31.65

#60

Post by bretpiatt » Sat, Feb 20, 2021, 10:52 PM UTC

lostlogin wrote: post #31

bretpiatt wrote: post #20

Here's raw table data to look at 15 min spot price per mWh http://www.ercot.com/content/cdr/html/20210220_real_time_spp Here's overall grid conditions in real-time http://www.ercot.com/content/cdr/html/real_time_system_condi... 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.

Any indication of what those links showed? I get ‘Access denied’.

Real-Time System Conditions

Last Updated: Feb 20, 2021 16:51:26 Frequency Current Frequency 60.007

Instantaneous Time Error -24.595

Consecutive BAAL Clock-Minute Exceedances (min) 0

Real-Time Data Actual System Demand 33772

Total System Capacity (not including Ancillary Services) 60667

Total Wind Output 8646

Total PVGR Output 323

Current System Inertia 223646

DC Tie Flows DC_E (East) -299 DC_L (Laredo VFT) 0 DC_N (North) -219 DC_R (Railroad) 0 DC_S (Eagle Pass) 0