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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

#21

Post by mindslight »

asmithmd1 wrote: post #12
jetrink wrote: post #10

Context: > 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 g…

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 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?

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

#22

Post by ggm »

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.

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

#23

Post by mumblemumble »

david-gpu wrote: post #13
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.

...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.

Perhaps related: https://xkcd.com/277/

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

#24

Post by mrDmrTmrJ »

hlieberman wrote: post #5

Good God, the Texas power grid is so fucked by speculation.

Why do think speculation is an issue here?

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.

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

#25

Post by ajsnigrutin »

asmithmd1 wrote: post #17
david-gpu wrote: post #13

Earlier quoted context omitted.

...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.

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 pricin…

> libertarian fantasy

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.

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

#26

Post by Dylan16807 »

bdonlan wrote: post #19
spacemanmatt wrote: post #8

Earlier quoted context omitted.

I believe that is an accurate description of disincentivizing oversupply. I hate ERCOT.

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?".

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

#27

Post by fgonzag »

david-gpu wrote: post #13
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.

...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.

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.

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

#29

Post by asmithmd1 »

mrDmrTmrJ wrote: post #18
spacemanmatt wrote: post #8

Earlier quoted context omitted.

I believe that is an accurate description of disincentivizing oversupply. I hate ERCOT.

Why do you hate ERCOT? 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. What leads you to a different opinion?

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.

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

#30

Post by mrDmrTmrJ »

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…

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.

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