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Explaining to my parents what I do

neelsomani.com

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Re: Explaining to my parents what I do

#21

Post by nsomani »

whatever1 wrote: post #10

Pricing at marginal cost is the biggest steal in economics. Just because one folk who contributes 0.1% to the energy mix has double the average cost, everyone gets to sneak in and get free money. Specially true in the last winter in Texas where we paid billions to the big power generators only to freeze to death. The best trick that I have seen happening in the industry is suffocating supply so that the new marginal…

Yeah I think the theoretical argument is that the uniform clearing price is supposed to incentivize producers to bid at their marginal cost

Re: Explaining to my parents what I do

#22

Post by whatever1 »

nsomani wrote: post #21
whatever1 wrote: post #10

Pricing at marginal cost is the biggest steal in economics. Just because one folk who contributes 0.1% to the energy mix has double the average cost, everyone gets to sneak in and get free money. Specially true in the last winter in Texas where we paid billions to the big power generators only to freeze to death. The best trick that I have seen happening in the industry is suffocating supply so that the new marginal…

Yeah I think the theoretical argument is that the uniform clearing price is supposed to incentivize producers to bid at their marginal cost

Which is a great idea if we had a thousand small producers of roughly equal capacity. It’s a horrible idea (for the consumers) when you have 3 huge players and then some tiny participants.

Re: Explaining to my parents what I do

#23

Post by mulmboy »

> ... it is a well-known type of problem, called a multiple integer program (MIP)

Is this meant to be "mixed integer program"?

Nice read. I find this especially interesting as I'm familiar with everything you've talked about here except only in Australia (AEMO). What you've written is like a parallel universe to what I know - very similar, but distinctly different.

Re: Explaining to my parents what I do

#25

Post by vasco »

pedrosorio wrote: post #12

I know close to nothing about economics and was a bit confused by this statement: "The line sloping downwards represents demand. As quantity increases (bottom axis), the price people are willing to pay also decreases." This makes it sound like there is an "available demand quantity" that is the independent variable and a "price" that is the dependent variable. But it seems a lot more intuitive to say "demand increase…

Not sure why you're getting downvoted for asking a question, but hopefully this page helps: https://en.wikipedia.org/wiki/Economic_graph

Re: Explaining to my parents what I do

#28

Post by caminante »

whatever1 wrote: post #20
caminante wrote: post #17

Earlier quoted context omitted.

For that, I don't blame the generation market as much as I fault legislators for horrible delays in decisions. The market cleared at the $9k/MWh cap for an excessive amount of time. E: and it was avoidable!

There was huge backlash even when this super high cap was passed. The initial idea was that the market will regulate itself, thus no cap is needed. The small detail they let out of the equation is that the taxpayers will have to bail out the market if it does not regulate itself. And boy did we pay for nice ceo bonuses that spring.

I forgot about this hilarious event where a regulator made the mistake of telling utilities they'd get bailed out.

https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#PUC_...

Re: Explaining to my parents what I do

#29

Post by halfway_there »

beambot wrote: post #13
thuruv wrote: post #7

// Albert Einstein said: "If you can't explain it to a six year old, you don't understand it yourself." I like to think this is true about explaining things to my parents - Isn't this a quote by Richard Feynman?

I found it ironic that this initial quote seemed to be the intent of the article... which then goes on to display charts and equations that are unlikely to jive with a six year old.

Pretty sure the intent of the article is to explain to his parents (as indicated by the title and sentence after the quote)

Re: Explaining to my parents what I do

#30

Post by the_pwner224 »

pedrosorio wrote: post #12

I know close to nothing about economics and was a bit confused by this statement: "The line sloping downwards represents demand. As quantity increases (bottom axis), the price people are willing to pay also decreases." This makes it sound like there is an "available demand quantity" that is the independent variable and a "price" that is the dependent variable. But it seems a lot more intuitive to say "demand increase…

Correct. Price is the independent variable, demand and supply are both dependent on price. But for some reason economists decided to put price on the Y axis. Confusing.

However. The demand and supply curves (lines) are dependent on price. But the intersection of those lines determines the optimal price. In that sense, price is dependent on supply and demand.

So 'price' the variable should be on the X axis since it's the independent variable which controls supply & demand. But 'the optimal price' is the dependent variable controlled by supply & demand, and so that should be on the Y axis.

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