14 ms·

I was not sure I was reading the map correctly, but it is true. If you rushed to get a power plant online because they were begging for power and offering $9k/M

I was not sure I was reading the map correctly, but it is true. If you rushed to get a power plant online because they were begging for power and offering $9k/MWhr, they are now charging you $30. http://www.ercot.com/content/cdr/html/20210220_real_time_spp http://www.ercot.com/content/cdr/html/20210220_real_time_spp

spacemanmatt 6y ago
I believe that is an accurate description of disincentivizing oversupply. I hate ERCOT.
- mrDmrTmrJ 6y ago
  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?
  - asmithmd1 6y ago
    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.
    - mrDmrTmrJ 6y ago
      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 ('natural gas') to run it's massive excess capacity. Now this isn't hard to do, Siberia, New England, and Scandinavia all have massive natural gas infrastructure that's fully winterized. But Texas never required that winterization, so they ran out of actual methane when they needed it most and then the turbines could not turn. Said differently, the underlying issue is regulatory and 'energy system' one - having a capacity market (like PJM or New England ISO) would in no way have changed the outcome because the state would still have run out of methane. Do you see it differently?
      - WalterBright 6y ago
        > Do you see it differently? Yes. If minute-by-minute retail electricity pricing was there, then there'd be a large incentive to winterize the fuel supply, because the ones who didn't would lose out on the profits from higher electric rates from the ones who did.
        kristjansson 6y ago
        Aren’t the generators already selling into a spot market that saw a multi thousand percent price increase in this demand peak, and are thus so incentivized? Providers AIUI are not responsible for any physical infrastructure, they’re selling volatility reduction by buying power from generators at spot and and sending it down publicly managed lines to customers for fixed rates. I buy your point up thread that more responsive retail pricing would’ve reduce demand faster[1], but I think generators just failed to foresee the failure points of their systems and the potential severity of winter events despite significant incentives to do so. Since the spot price hit its statutory cap, you might argue that the limit on potential windfall profits rendered winterization ROÍ negative - which might be true but if the only way to keep the lights on is to let the generators plan on pillaging a state in crisis, the state might want to step in to provide support beforehand. [1] leaving aside the point the ‘reducing demand’, in this instance, means poor people are cold or worse.
    - WalterBright 6y ago
      If the consumer retail electricity rate was allowed to float minute by minute, there'd be no need for "peaker" plants. The notion of fixed electricity rates is the source of most of the problems. After all, there are regular events where oil refineries go off like, burn down, blow up, etc., and yet I'm still able to buy gas because the pump prices go up, reducing demand to match the supply. Note that this big freeze also impacted gas deliveries, and gas prices went up, and no shortages. A fixed pump price would have produced shortages and lines. Whenever there are shortages, there's almost always a fixed price in there causing the problem.
      - sep_field 6y ago
        One problem with this is it forms a regressive structure where poor people are priced out while rich people get to keep consuming at whatever rate they can stomach. It would work better and much more fairly if the floating rate was scaled by the net worth of the customer.
        AnthonyMouse 6y ago
        That's completely defeating the purpose of the price signal, which is to cause whoever is the most price sensitive to cut usage. By charging less to the people who are most price sensitive, the average price charged in order to deter usage would have to increase dramatically. It also creates ridiculous perverse incentives where people with little money waste electricity in the midst of a shortage because they're not being charged the market price for it, forcing cuts in actually productive alternatives.
        sep_field 6y ago
        You are right it creates perverse incentives, but so does the current system. For instance check this article [0] that shows pictures of Houston's skyline during the recent power outages where completely empty skyscrapers are wasting power while ordinary people freeze. I'd rather have poor people using electricity than rich corporations. At least keeping people warm is productive. [0] https://heavy.com/news/photos-houston-skyline-lit-up-power-outage/ https://heavy.com/news/photos-houston-skyline-lit-up-power-o...
  - throw0101a 6y ago
    > I ask because I broadly understand ERCOT to have delivered the lowest prices and the highest reliability over the last decade. Until they didn't. Until any money savings you may have gotten over the last decade was eaten up by what will be the cost of the burst pipes and flooding of your house. How are ERCOT's prices compared to El Paso's? > El Paso Electric said they always try to prepare for the future and after a winter storm in 2011, the utility company worked towards replacing and upgrading their equipment. Many generators now have antifreeze protection. > "We went from plus-10 degrees which was what the original equipment was designed for to a minus-10, so currently everything we install or upgrade is done to a minus-10 degree sustained temperature," said Louie Guarderrama, director of operations for the utility company. * https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing-power-outages-like-the-rest-of-texas-and-heres-why/ https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing...
    - khuey 6y ago
      > Until they didn't. Until any money savings you may have gotten over the last decade was eaten up by what will be the cost of the burst pipes and flooding of your house. Yeah but that's going to be paid for property insurers or perhaps federal disaster relief funds. ERCOT successfully externalized the cost of coping with frigid temperatures, allowing them to provide power at lower prices.
      - Olreich 6y ago
        Externalizing costs might be good for business, but it’s pretty clearly not good for customers here.
      - kevingadd 6y ago
        If this happens consistently enough, your insurance prices are going to go up. Disaster relief funds aren't unlimited either, and you can experience significant delays when the time comes to go ask for them to pay out.
    - adolph 6y ago
      That’s great that El Paso got this failure mode right. Are there other modes that they de-prioritized? Is holding them up as a model of success a form of "resulting" [0] since we don't know what counterfactuals in which they would have failed? El Paso Energy is interesting bc it represents the old school community monopoly.[1] I wonder if the JPM buyout will help or hinder its mission. 0. https://nautil.us/issue/55/trust/the-resulting-fallacy-is-ruining-your-decisions https://nautil.us/issue/55/trust/the-resulting-fallacy-is-ru... 1. https://en.wikipedia.org/wiki/El_Paso_Electric https://en.wikipedia.org/wiki/El_Paso_Electric
  - spacemanmatt 6y ago
    ERCOT is just part of the GOP-designed grid that has refused to weatherize, even after multiple "100-year events" that happened inside 15-20 years. Now we're burying Texans because a few officials think this is what freedom looks like. Did were those ERCOT's power plants or ERCOT's companies or was it even ERCOT's purview to tell them to weatherize? Of course not. Does ERCOT serve the same boss as Republicans and energy companies? Absolutely. I hope that better explains why I hate ERCOT, lest you think everyone who has an opinion different than yours is a fool. I am used to that. Most people have no idea how little Texans care for GOP go-it-alone politics.
- bdonlan 6y ago
  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.
  - Dylan16807 6y ago
    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?".
    - WalterBright 6y ago
      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.
      - Dylan16807 6y ago
        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.
        WalterBright 6y ago
        In the 1970s, the feds decided they could set prices and allocate gas far more efficiently than the market. The result was many years of gas shortages and long lines. Reagan's first act in 1980 was an Executive Order to repeal all of that. The gas lines disappeared literally overnight, and have not returned in 40 years. I don't buy that anything is fundamentally different about electricity. > case of shortage you don't instantly cripple households The point of market pricing is you don't have shortages. The price rises until demand drops to match the supply. Rolling blackouts and peaker plants would be unnecessary with market pricing. Demand for electricity is very elastic. I'd change my behavior if rates doubled. Wouldn't you, too? I bet you could easily cut your consumption by 50% without any particular hardship. Put on a sweater, read a book instead of watch TV, lights on only when you need them, turn off exterior lights, shorten the time your computer goes into power saving mode, etc. A lot better than rolling blackouts.
- fallingknife 6y ago
  You hate ERCOT for disincentivizing oversupply?
  - spacemanmatt 6y ago
    No. Is that your real estimate of an actual Texan who just saw neighbors lose power and water for up to 9 days during a historic freeze? There is a body count of 75, last I heard.

spacemanmatt 6y ago

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

mrDmrTmrJ 6y ago
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?
- asmithmd1 6y ago
  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.
  - mrDmrTmrJ 6y ago
    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 ('natural gas') to run it's massive excess capacity. Now this isn't hard to do, Siberia, New England, and Scandinavia all have massive natural gas infrastructure that's fully winterized. But Texas never required that winterization, so they ran out of actual methane when they needed it most and then the turbines could not turn. Said differently, the underlying issue is regulatory and 'energy system' one - having a capacity market (like PJM or New England ISO) would in no way have changed the outcome because the state would still have run out of methane. Do you see it differently?
    - WalterBright 6y ago
      > Do you see it differently? Yes. If minute-by-minute retail electricity pricing was there, then there'd be a large incentive to winterize the fuel supply, because the ones who didn't would lose out on the profits from higher electric rates from the ones who did.
      - kristjansson 6y ago
        Aren’t the generators already selling into a spot market that saw a multi thousand percent price increase in this demand peak, and are thus so incentivized? Providers AIUI are not responsible for any physical infrastructure, they’re selling volatility reduction by buying power from generators at spot and and sending it down publicly managed lines to customers for fixed rates. I buy your point up thread that more responsive retail pricing would’ve reduce demand faster[1], but I think generators just failed to foresee the failure points of their systems and the potential severity of winter events despite significant incentives to do so. Since the spot price hit its statutory cap, you might argue that the limit on potential windfall profits rendered winterization ROÍ negative - which might be true but if the only way to keep the lights on is to let the generators plan on pillaging a state in crisis, the state might want to step in to provide support beforehand. [1] leaving aside the point the ‘reducing demand’, in this instance, means poor people are cold or worse.
  - WalterBright 6y ago
    If the consumer retail electricity rate was allowed to float minute by minute, there'd be no need for "peaker" plants. The notion of fixed electricity rates is the source of most of the problems. After all, there are regular events where oil refineries go off like, burn down, blow up, etc., and yet I'm still able to buy gas because the pump prices go up, reducing demand to match the supply. Note that this big freeze also impacted gas deliveries, and gas prices went up, and no shortages. A fixed pump price would have produced shortages and lines. Whenever there are shortages, there's almost always a fixed price in there causing the problem.
    - sep_field 6y ago
      One problem with this is it forms a regressive structure where poor people are priced out while rich people get to keep consuming at whatever rate they can stomach. It would work better and much more fairly if the floating rate was scaled by the net worth of the customer.
      - AnthonyMouse 6y ago
        That's completely defeating the purpose of the price signal, which is to cause whoever is the most price sensitive to cut usage. By charging less to the people who are most price sensitive, the average price charged in order to deter usage would have to increase dramatically. It also creates ridiculous perverse incentives where people with little money waste electricity in the midst of a shortage because they're not being charged the market price for it, forcing cuts in actually productive alternatives.
        sep_field 6y ago
        You are right it creates perverse incentives, but so does the current system. For instance check this article [0] that shows pictures of Houston's skyline during the recent power outages where completely empty skyscrapers are wasting power while ordinary people freeze. I'd rather have poor people using electricity than rich corporations. At least keeping people warm is productive. [0] https://heavy.com/news/photos-houston-skyline-lit-up-power-outage/ https://heavy.com/news/photos-houston-skyline-lit-up-power-o...
- throw0101a 6y ago
  > I ask because I broadly understand ERCOT to have delivered the lowest prices and the highest reliability over the last decade. Until they didn't. Until any money savings you may have gotten over the last decade was eaten up by what will be the cost of the burst pipes and flooding of your house. How are ERCOT's prices compared to El Paso's? > El Paso Electric said they always try to prepare for the future and after a winter storm in 2011, the utility company worked towards replacing and upgrading their equipment. Many generators now have antifreeze protection. > "We went from plus-10 degrees which was what the original equipment was designed for to a minus-10, so currently everything we install or upgrade is done to a minus-10 degree sustained temperature," said Louie Guarderrama, director of operations for the utility company. * https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing-power-outages-like-the-rest-of-texas-and-heres-why/ https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing...
  - khuey 6y ago
    > Until they didn't. Until any money savings you may have gotten over the last decade was eaten up by what will be the cost of the burst pipes and flooding of your house. Yeah but that's going to be paid for property insurers or perhaps federal disaster relief funds. ERCOT successfully externalized the cost of coping with frigid temperatures, allowing them to provide power at lower prices.
    - Olreich 6y ago
      Externalizing costs might be good for business, but it’s pretty clearly not good for customers here.
    - kevingadd 6y ago
      If this happens consistently enough, your insurance prices are going to go up. Disaster relief funds aren't unlimited either, and you can experience significant delays when the time comes to go ask for them to pay out.
  - adolph 6y ago
    That’s great that El Paso got this failure mode right. Are there other modes that they de-prioritized? Is holding them up as a model of success a form of "resulting" [0] since we don't know what counterfactuals in which they would have failed? El Paso Energy is interesting bc it represents the old school community monopoly.[1] I wonder if the JPM buyout will help or hinder its mission. 0. https://nautil.us/issue/55/trust/the-resulting-fallacy-is-ruining-your-decisions https://nautil.us/issue/55/trust/the-resulting-fallacy-is-ru... 1. https://en.wikipedia.org/wiki/El_Paso_Electric https://en.wikipedia.org/wiki/El_Paso_Electric
- spacemanmatt 6y ago
  ERCOT is just part of the GOP-designed grid that has refused to weatherize, even after multiple "100-year events" that happened inside 15-20 years. Now we're burying Texans because a few officials think this is what freedom looks like. Did were those ERCOT's power plants or ERCOT's companies or was it even ERCOT's purview to tell them to weatherize? Of course not. Does ERCOT serve the same boss as Republicans and energy companies? Absolutely. I hope that better explains why I hate ERCOT, lest you think everyone who has an opinion different than yours is a fool. I am used to that. Most people have no idea how little Texans care for GOP go-it-alone politics.
bdonlan 6y ago
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.
- Dylan16807 6y ago
  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?".
  - WalterBright 6y ago
    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.
    - Dylan16807 6y ago
      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.
      - WalterBright 6y ago
        In the 1970s, the feds decided they could set prices and allocate gas far more efficiently than the market. The result was many years of gas shortages and long lines. Reagan's first act in 1980 was an Executive Order to repeal all of that. The gas lines disappeared literally overnight, and have not returned in 40 years. I don't buy that anything is fundamentally different about electricity. > case of shortage you don't instantly cripple households The point of market pricing is you don't have shortages. The price rises until demand drops to match the supply. Rolling blackouts and peaker plants would be unnecessary with market pricing. Demand for electricity is very elastic. I'd change my behavior if rates doubled. Wouldn't you, too? I bet you could easily cut your consumption by 50% without any particular hardship. Put on a sweater, read a book instead of watch TV, lights on only when you need them, turn off exterior lights, shorten the time your computer goes into power saving mode, etc. A lot better than rolling blackouts.
fallingknife 6y ago
You hate ERCOT for disincentivizing oversupply?
- spacemanmatt 6y ago
  No. Is that your real estimate of an actual Texan who just saw neighbors lose power and water for up to 9 days during a historic freeze? There is a body count of 75, last I heard.