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Clearing price for supplying power to Texas grid –$31.65

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

#231

Post by AtlasBarfed »

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…

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.

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

#232

Post by mikewarot »

tyingq wrote: post #220
mikewarot wrote: post #205

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 el…

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.

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

#233

Post by sep_field »

gruez wrote: post #221
sep_field wrote: post #199

Earlier quoted context omitted.

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…

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.

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

#234

Post by jacobr1 »

kristjansson wrote: post #112
tzs wrote: post #94

Earlier quoted context omitted.

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…

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.

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

#235

Post by CraigJPerry »

austincheney wrote: post #227
CraigJPerry wrote: post #183

Earlier quoted context omitted.

I suspect the parent is fully cognisant of this. They are illuminating one of the fallacies of the free market extremists.

Free market vs regulation are irrelevant to my comment. Neither make rare conditions required for testing less rare.

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?

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

#236

Post by smaddox »

mrDmrTmrJ wrote: post #54
Osiris wrote: post #35

Earlier quoted context omitted.

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 s…

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.

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

#237

Post by mplanchard »

underwater wrote: post #135
mrDmrTmrJ wrote: post #54

Earlier quoted context omitted.

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 s…

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…

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.

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

#238

Post by kortilla »

sanp wrote: post #209
kortilla wrote: post #86

Earlier quoted context omitted.

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…

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 ye…

> 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.

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

#240

Post by wavefunction »

gruez wrote: post #193
oivey wrote: post #126

Earlier quoted context omitted.

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…

>The price of electric and natural gas skyrocketed during the shortage. AFAIK the price was capped. https://news.ycombinator.com/item?id=26160546

Wholesale prices are capped. They contribute to but don't limit the price paid by retail customers.
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