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Texas power crisis revealed flaw in market’s design

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Re: Texas power crisis revealed flaw in market’s design

#161

Post by dane-pgp »

Johnny555 wrote: post #83
Panzer04 wrote: post #59

Earlier quoted context omitted.

If you don’t raise prices, many people/companies will senselessly consume excess electricity they don’t need. Thus, you get power outages instead of merely high prices. That being said, it’s not like most people have a real-time monitor of electricity prices so those that can will actually reduce consumption. Ultimately, in a constrained system, either you raise prices (and ensure availability, at expense) or fix pri…

That being said, it’s not like most people have a real-time monitor of electricity prices so those that can will actually reduce consumption. It's worse than that, this was an extreme weather condition (temps as low as -2F/-19C) in a state where 60% of homes are heated by electricity and many of those use inefficient electrical resistance heating. So even if residential users had real-time access to prices, they'd ha…

> inefficient electrical resistance heating.

Inefficient in the sense that some of the electricity is turned into... waste heat?

Re: Texas power crisis revealed flaw in market’s design

#162

Post by ocschwar »

cool_dude85 wrote: post #122
ocschwar wrote: post #114

Earlier quoted context omitted.

Capacity payments ARE a market mechanism. It's like paying the ambulance squad for answering your call when you need medical help, and paying the ambulance squad to exist in the first place regardless of whether you call. Both services are valuable. And both of them can be paid for in a market mechanism.

>Capacity payments ARE a market mechanism. Yes, I think maybe my post wasn't clear enough. The usual justification for deregulation as in Texas, California, and other states is the supposed improved efficiency of generation assets as a result of these market mechanisms. I claim, to be fair without evidence, that the way these "efficiencies" are realized is to cut down on surplus capacity. As such, the existence of ca…

SO here's the thing: " 3 - Market mechanisms are needed to incentivize surplus capacity, or else we wind up with blackouts."

Market mechanisms DO incentivize surplus capacity. There are peaker plants stationed all over the US that operate under 24 hours a year. The rest of the time they're either paid to be on standby through a capacity auction, or they're just not paid.

SOme of these plants also exist in Texas. And they are there because companies crunched the numbers based on past data and saw that the money coming in for those few hours is enough to cover that whole year.

The thing is, those high pricing events, which usually happen during heat waves, are something you can quantify: how often do they happen, how much money can you make, how much money will it cost to set up and wait for those events. Probabilty and severity are both quantifiable.

The polar vortex events that hit Texas this year, last year, and 10 years ago, are something that is not quantifiable. I know, because otherwise my company would be quantifying it. SO it's high severity, incalculable probability - ergo a black swan event. The market cannot deal with those.

Re: Texas power crisis revealed flaw in market’s design

#163

Post by pwr-electronics »

nickff wrote: post #69
spamizbad wrote: post #58

Earlier quoted context omitted.

What I don’t understand about the Texas electricity market is that, despite how “free” it is, price per kwh isn’t terribly competitive compared to more tightly regulated states - having the highest average residential rates in the West South Central region: https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

It looks like Texas has higher residential, but lower commercial and industrial rates than others. It may be that other states apply policies which depress residential rates at the cost of increasing ‘business’ rates.

That's exactly it. Residential service is naturally the most expensive to operate. National regulations impose price caps on residential. But Texas is the only state that isn't subject to those rules because they're not synchronously connected to another grid. Which on top of that makes them less reliable, and thus more expensive.

Re: Texas power crisis revealed flaw in market’s design

#165

Post by missedthecue »

thomascgalvin wrote: post #75
spamizbad wrote: post #58

Earlier quoted context omitted.

What I don’t understand about the Texas electricity market is that, despite how “free” it is, price per kwh isn’t terribly competitive compared to more tightly regulated states - having the highest average residential rates in the West South Central region: https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

Deregulation isn't about improving consumer outcomes, it's about improving profits. Expecting it to result in lower cost per kWh is a losing game.

So the profits are greater and the costs are marginally cheaper?

Re: Texas power crisis revealed flaw in market’s design

#166

Post by Johnny555 »

dane-pgp wrote: post #161
Johnny555 wrote: post #83

Earlier quoted context omitted.

That being said, it’s not like most people have a real-time monitor of electricity prices so those that can will actually reduce consumption. It's worse than that, this was an extreme weather condition (temps as low as -2F/-19C) in a state where 60% of homes are heated by electricity and many of those use inefficient electrical resistance heating. So even if residential users had real-time access to prices, they'd ha…

> inefficient electrical resistance heating. Inefficient in the sense that some of the electricity is turned into... waste heat?

In the sense that a good heat pump can be over 400% efficient but electrical resistance heat is 100% efficient.

(ok, it's not scientifically correct to say that anything is over 100% efficient, and COP gets lower as the temperature decreases, but a good minisplit can still deliver a COP close to 2.0 down to 0 degrees F)

Re: Texas power crisis revealed flaw in market’s design

#167

Post by bryanlarsen »

ocschwar wrote: post #162
cool_dude85 wrote: post #122

Earlier quoted context omitted.

>Capacity payments ARE a market mechanism. Yes, I think maybe my post wasn't clear enough. The usual justification for deregulation as in Texas, California, and other states is the supposed improved efficiency of generation assets as a result of these market mechanisms. I claim, to be fair without evidence, that the way these "efficiencies" are realized is to cut down on surplus capacity. As such, the existence of ca…

SO here's the thing: " 3 - Market mechanisms are needed to incentivize surplus capacity, or else we wind up with blackouts." Market mechanisms DO incentivize surplus capacity. There are peaker plants stationed all over the US that operate under 24 hours a year. The rest of the time they're either paid to be on standby through a capacity auction, or they're just not paid. SOme of these plants also exist in Texas. And…

That was a one in a century or so storm. It was predictable.

Re: Texas power crisis revealed flaw in market’s design

#168

Post by vkou »

nickff wrote: post #69
spamizbad wrote: post #58

Earlier quoted context omitted.

What I don’t understand about the Texas electricity market is that, despite how “free” it is, price per kwh isn’t terribly competitive compared to more tightly regulated states - having the highest average residential rates in the West South Central region: https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

It looks like Texas has higher residential, but lower commercial and industrial rates than others. It may be that other states apply policies which depress residential rates at the cost of increasing ‘business’ rates.

That's consistent with how Texas approaches governance as a whole. Nickel and dime the residents, bend over backwards for landowners and corporations.

Re: Texas power crisis revealed flaw in market’s design

#169

Post by jabl »

bryanlarsen wrote: post #167
ocschwar wrote: post #162

Earlier quoted context omitted.

SO here's the thing: " 3 - Market mechanisms are needed to incentivize surplus capacity, or else we wind up with blackouts." Market mechanisms DO incentivize surplus capacity. There are peaker plants stationed all over the US that operate under 24 hours a year. The rest of the time they're either paid to be on standby through a capacity auction, or they're just not paid. SOme of these plants also exist in Texas. And…

That was a one in a century or so storm. It was predictable.

How are you going to get investment money for a project that may, or with some probability may not, hit the jackpot sometime during the next century but otherwise lose money all the time?

Re: Texas power crisis revealed flaw in market’s design

#170

Post by roenxi »

thomascgalvin wrote: post #75
spamizbad wrote: post #58

Earlier quoted context omitted.

What I don’t understand about the Texas electricity market is that, despite how “free” it is, price per kwh isn’t terribly competitive compared to more tightly regulated states - having the highest average residential rates in the West South Central region: https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

Deregulation isn't about improving consumer outcomes, it's about improving profits. Expecting it to result in lower cost per kWh is a losing game.

What seems most remarkable to me is that we've got a fair amount of anti-free-market vitriol in the replies around here but nobody feels a need to provide any argument or evidence.

The only person waving evidence around in this thread demonstrates that Texas has substantially lower electricity prices than the US average. And the article argues that there are edge cases where the market design could be improved. But I am well aware that the US has a range of regulatory strategies around power and I'm sure people have done detailed, exhaustive comparisons that are of high quality on the effects and outcomes of different regulatory approaches. Surely there are mountains of evidence that could be pointed to here.

Is it to much to ask that the opinions are supported by evidence? Electricity outcomes aren't that complex. The important variables are price, reliability, safety and pollution if you like.

Texas having a power crisis recently just isn't that big a deal for arguing about regulation vs deregulation on either side of the fence. Highly regulated systems also have crisises, regulators aren't perfect and nobody claims they are.

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