16 ms·

On power markets, snow storms, and $16k power bills

67 points by astanway 6y ago

xwdv 6y ago
If you're feeding power back into the grid are you getting paid at these rates?
- astanway 6y ago
  For wholesale players: yes. If you're a retailer and you buy an electricity future and then only use half of it across your customer base, you sell the remainder at real time prices. And for generator, selling real time power is the entire business model. For consumers: no, not generally. Some markets have schemes to sell leftover solar power at real time prices, but I believe these are being phased out. Both grids and markets are by and large not set up yet for full two-way markets between consumers and producers.
  - makomk 6y ago
    I believe Octopus Energy in the UK lets people both buy power and sell it back to the grid at time-dependent pricing, though I'm not sure how it works exactly and I'm pretty sure technically they're two separate contracts.
- savanaly 6y ago
  This is a good point. Markets sting when they skyrocket to high prices. But the sting is supposed to be matched bit for bit by the benefits-- incentivizing people to cut back when they should (something most people would only begrudgingly acknowledge as a benefit when it's happening to them, if acknowledge it at all), and incentivizing innovative behaviors to exploit it to make a quick buck. I haven't heard much about that last part; like you said, it would be great if the market works such that on the margin a player can exploit that price to make a quick buck (by, e.g. rigging some kind of battery up before a storm that's coming and making bank off the arbitrage when the storm hits by emptying the battery back in to the grid). Now maybe the transaction costs or economies of scale or whatever make that infeasible-- if so too bad-- but it's worth remembering this is half the benefit of a market system.
- timgebrally 6y ago
  I have solar on my house and in IL we get paid via "net metering": https://www.citizensutilityboard.org/illinois-net-metering/ https://www.citizensutilityboard.org/illinois-net-metering/ . The idea is you size a system for your annual energy consumption, and then you don't pay for electricity for the year. If you sold the power back for real-time pricing you'd need a much larger system than your annual consumption. Net metering basically lets you sell the power back at a retail price, not a wholesale price.
  - samkater 6y ago
    From what I understand there is a lot of variation in providers. As I understand SDGE's Net Metering policy(https://www.sdge.com/residential/solar/getting-started-with-solar https://www.sdge.com/residential/solar/getting-started-with-...), you sell back power at retail prices only for the current month's billing cycle. Excess energy created within a billing cycle is "true-upped" at wholesale prices which can be applied to other month's billing cycles. I would also be curious in how the Texas case works. Especially if the grid is down, would it be able to accept the energy you are producing?
    - bluGill 6y ago
      The rules in Illinois are you net meter for the year. If you make more than you use in a year that is free power for the utility. If you want a different deal you need a contract with the utility (In general you need to be in the millions of dollars/year range to be of interest). In Texas it is more complex as each provider can give you a different deal for residential systems. When the grid is down you can't sell power back. The whole system shuts down. Though if you have a whole house battery backup you can use that instead of the grid (if it is built for it - solar gets weird if you aren't using exactly as much power as you make so you need something to use or make up the difference).
- xur17 6y ago
  I was reading about Griddy, and my understanding is that you can do exactly this with them [0]. [0] https://www.reddit.com/r/griddy/comments/lnrxn8/who_is_coming_back/go2cliq/ https://www.reddit.com/r/griddy/comments/lnrxn8/who_is_comin...
mortenjorck 6y ago
Is there a reason why time-of-use systems can’t have a customer-defined price limit, beyond which they opt into a blackout? The sense I got from the stories of people suddenly facing five-figure power bills is that most would have gladly spent a night or two with propane and candles rather than cleaning out their savings.
- londons_explore 6y ago
  Laws generally prevent this (generally a customer's supply can only be cut off with a long and precise legal procedure). It's possible it might be doable with a user override.
  - Spivak 6y ago
    I think you have this backwards. This isn't the power company shutting off your power. This is telling your agent (in this case Griddy) to stop buying power under some conditions that you define.
    - londons_explore 6y ago
      I understand... But in the eyes of the law, Griddy is your power company, and their equipment shutting off your supply might break a lot of laws about disconnecting people without giving the requisite notice, legal procedure, etc. Where do you draw the line? "Griddy, please turn my power off if the price goes above $1/kwh"... "Griddy, please turn the power off if I forget to pay the bill.", "Griddy, I'll take a $10/month discount if the power gets turned off when my bill is paid late?", "Griddy, I want to use non-ripoff plan, so I'm happy for you to turn my power off the minute I pay late". See how it isn't really feasible to stop power companies forcibly illegally disconnecting debtors if you allow a debtor to agree to be disconnected voluntarily?
      - nybble41 6y ago
        If the property owner has a button to override the cut-off and turn the power back on then that should satisfy any legal requirements related to unilateral disconnection of power. The disconnect should happen on the customer's side anyway. The power company just needs to provide accurate information about the current price in a form that can be used by an automated switch. Important circuits could be placed on a separate panel with a higher cut-off point.
jerf 6y ago
I am not in Texas, so a couple of questions for those who may be affected by this story, because I've been wondering about this: 1. If you are on this plan, what is your visibility into current prices for electricity? e.g., are there any alerts that you could have signed up, even if you hadn't before? 2. Have you been bitten by unexpected high prices before, perhaps in the summer? 3. Prior to this event, would you say you saved money overall with Gridly?
- egwor 6y ago
  To 1.: didn't one provider email their client base to warn them of this?
  - kingaillas 6y ago
    Yes that was Griddy that emailed their client base. Whether or not they did it and gave their customers sufficient time to do the switch is another matter (i.e. close of business day timing, normal delays involved in new account enrollment, and so on). EDIT: To be clear I'm not throwing Griddy under the bus for sending email late or without more time. I think they were doing what they could for their customers upon seeing the wholesale prices skyrocket. But the reality is that it takes time to switch services even under normal conditions, without thousands of others trying to do the same.
    - gregw2 6y ago
      I heard on the news here in Texas that reporters indicated it takes a few days to switch, so while Griddy sent the email, their customers were not able to really act on the advice amidst the crisis. That said, I think it was bad advice from Griddy for a second reason. I think they should have told their customers to just go to their house fuse box and shut off their power to avoid the inevitable huge bill. I'm not sure why others haven't mentioned this but the customers did ultimately have that recourse. This is the unfortunate but logical thing to do when your 6c/kWh bill grows to $9/kWh. And at least you can intermittently turn it back on when needed to heat your house for a short bit, etc which is still better than being totally out for 3 days as many people here were.
tehwebguy 6y ago
There are some interesting details here but let's be suuuper clear, nobody in the residential sector consented to a 12,000% increase in power costs or a $5,000 - $16,000 power bill this month. I think the article tries extremely hard to forgive everyone involved aside from the residents who have now been completely devastated by this. The only real acknowledgement that residents have truly suffered something they didn't deserve is sandwiched between statements completely clearing Griddy & ERCOT of wrongdoing: > The point is that while Griddy customers should definitely be entitled to relief, Griddy is not evil. Nor is ERCOT.
- techsupporter 6y ago
  Exactly. In my experience, there are exactly two types of customers on the kinds of plans like Griddy offers: a) people who are heavily into cost-optimization and have spent the cash to automate their living quarters to take advantage of wholesale price swings; and b) people who are trying to stretch a dollar because a single dollar is all they have left. For people in that second category, the dollar broke and smacked them in the face. I am by no means calling people stupid for doing this; they believed the sales pitch and either did not understand (because the wholesale pricing model is actually complex) or were not told the massive potential downsides. And when the cost of keeping where you live at a livable temperature runs into the mid-three-digits per month during the summer, you're going to jump at the idea of slashing that by two-thirds. This is consent in the same way that clicking "agree" on a 15,000-word EULA is consent. It isn't.
  - ahepp 6y ago
    I used to have these guys (EDIT: energy dereg companies, not griddy specifically) knocking on my door regularly with a pen, asking me to sign a contract for real time pricing literally on the spot, because I could save a bunch of money on my bill I would be shocked if there is any energy deregulation company that doesn't resort to this, because it's the basic result of hiring contractors and paying them on commission
    - paulgb 6y ago
jonas21 6y ago
I didn't see this mentioned in the article, but there are many time-of-use plans that offer variable rates without exposing the consumer to additional risk. For example, my electric plan has different rates for "peak" (4pm - 9pm), "super off-peak" (12am - 6am), and "off-peak" (everything else). But these rates are fixed, so I know in advance how much I'll need to pay. This still incentivizes me to shift my usage to lower-demand times, flattening the demand curve under typical conditions. But it doesn't expose me to tail risk.
- jandrese 6y ago
  That means you're not on the market. You just have a more complicated fixed rate plan.
  - jonas21 6y ago
    I understand that -- but it seems like the main point of the article is: > I believe we ultimately need some degree of real time price exposure for consumers if we are to induce these kinds of widespread energy efficiency investments, because it can and does encourage significant reductions in individual electricity consumption during times of peak grid demand, which is good for the grid and good for the planet. And I'm just pointing out that you can get most of the benefit without exposing consumers to additional risk, and that such plans are already widely available, at least where I live.
    - jandrese 6y ago
      But also as you pointed out that doesn't really help in cases like last week because you're not being directly affected by this market shift. In fact your plan was probably counterproductive since the cheapest power to you came when it was most expensive to the operator--over night.
    - cwkoss 6y ago
      This is an important point, because the author of the post is essentially trying to argue that letting Texans either freeze to death or be price gouged is somehow necessary to fight climate change. Regulations would have solved this. Why does the word "regulation" only appear in this article once? Make winterization standards a requirement of participating in the market.
jandrese 6y ago
It strikes me that Texas is suffering the same sort of problems that companies that switch to just-in-time delivery do. When everything is working they're more efficient and can out-compete their neighbors, but since they're running with little to no safety margin it only takes one incident to cause immediate disruption to the line. Of course when the consequence of a disruption is you miss your production targets for the week it's not so bad. When the consequence is thousands of people freezing to death maybe you should step back and ask if this is really what you want. Is it worth saving a fraction of a penny per kWh if it means the system can't budget for extreme events or even long term maintenance? Markets are extremely good at optimizing for the lowest cost (most efficiently) solution, but they're no good for planning for unusual events or for handling externalities. At some point a government needs to step in and set some (unpopular) ground rules so the players in the market don't have to race all the way to the bottom to stay competitive.
- aqme28 6y ago
  See also: hospitals running at close full capacity in a normal year[1], and then a pandemic comes along. [1]: https://www.usnews.com/news/health-news/articles/2020-03-26/us-hospital-beds-were-already-maxed-out-before-coronavirus-pandemic https://www.usnews.com/news/health-news/articles/2020-03-26/...
  - bluGill 6y ago
    Perhaps, but health care is so heavily managed nobody can call it a market. Most communities have a limit on how many hospital beds that are allowed which means that there isn't even an opportunity to do much better.
    - jandrese 6y ago
      That's kind of the core of the problem with healthcare in the US. We treat it like a market where you can't see the prices and where customer are forced to buy the product or die. Then we wonder why it's so expensive.
martinald 6y ago
In the UK energy supplier Octopus has an "agile" tariff which is similar to griddy (we are increasingly getting negative prices here). However, it has a 35p/kWh price cap (2-3x average rates). I don't understand why Griddy didn't do something similar. Even a $1/kWh price cap would have really helped them.
- mytailorisrich 6y ago
  In the UK, consumer and contract law mean that it is not possible, afaik, to have 'open-ended' contracts. I.e. a party to a contract must always be able to determine how much entering into the contract is going to cost them and/or they must be be able to leave with a capped and known worst-case. That's why there are always caps or capped increases.
- AnssiH 6y ago
  Similar with my provider in Finland, capped at 0.085€/kWh (approx. 2x avg): https://www.sahkolaitos.fi/en/products/tuntisahko/ https://www.sahkolaitos.fi/en/products/tuntisahko/
  - martinald 6y ago
    Wow, those are some great prices! How come Finnish electricity is so cheap?
TrackerFF 6y ago
Can anyone tell me: Why is there no automatic stop-limit the customers can opt into? Once the $/KWh passes some threshold, power either gets turned off, or they get some short grace period to figure out whether they want to continue or stop. Price runs like these are things consumers will experience probably a handful of times in their lifetimes. If they run wild, they can financially ruin someone. In the grand scheme of things, these are black-swan events. There should be safety guards in place.
- bluGill 6y ago
  Because nobody thought they would need it until it was too late. Note that everyone at risk of this even was told beforehand to switch providers now, so there was an "easy out" if you were paying attention (In theory easy, in practice, while it isn't never easy). Or you could have turned your own power off - When you get a time of use contract the point is you want to adjust your demand to fit the price, so anyone who got a large bill failed to do their end of the bargain.
- _jal 6y ago
  Creating complicated pricing automation for home consumers for rare situations when they're exposed to brutal pricing in a life-or-death crisis is not the solution. If anything, you'll be causing more chaos, as people grapple with rules they don't remember setting up. The safety guards tend to be laws saying, "you can't sell those". Consumer utilities should be boring and predictable, and need to be legally controlled to stay that way.
uadnils 6y ago
1. The statement "it’s clear that those high prices weren’t doing their job" and subsequent disagreement with raising the price cap does not make sense to me. Any artificial price cap seems to limit the effectiveness of a market. From the producer's side, it limits the incentive to model and capture these tail events (e.g. winterize). From the consumer's side, it limits the incentive to reduce consumption. Is my perspective off here? 2. Is it possible to subscribe to two (or n) energy plans? Imagine subscribing to a wholesale plan (e.g. Griddy) and a fixed-rate plan and switching between them whenever wholesale prices rise above the fixed rate. Are there legal or practical reasons this can't happen?
- function_seven 6y ago
  Practical reason is that the fixed-rate provider would not want to do business with you. You would only use their service when they lose money. So they’d require exclusivity as a condition for service.
- cwkoss 6y ago
  For #2, I bet that it would drastically cut into energy company profits and thus is not politically practical in TX.
  - function_seven 6y ago
    Even a non-profit utility would not agree to be the fixed rate provider in this scenario. It would be a guaranteed money loser, for the same reason that I can’t buy auto insurance just after I crash my car, or health coverage just after I’m diagnosed with cancer.
    - evancox100 6y ago
      I mean, except you can do the latter. The whole "must cover pre-existing conditions" thing. Market still manages to function, and even without the individual mandate. How exactly? ¯\_(ツ)_/¯
      - 6y ago
woeirua 6y ago
The big takeaway from all of this should be the critical cyclic dependency of natural gas power plants. That is, if your primary source of power is natural gas, then you must have reliable power to the natural gas wells to produce natural gas. If the power becomes unreliable, then natural gas pressures in the pipelines drop to unsuitable levels to run large generators. As the generators trip due to adverse safety conditions, then your power generation decreases even further, thereby making the natural gas pipeline pressure even worse. It's entirely possible to foresee a cycle wherein a grid powered mostly or entirely by natural gas could end up unable to maintain any power generation under the right circumstances. This is a very strong and compelling argument for maintaining some core baseload generation capacity that is completely independent of existing power generation. Batteries could be one solution. Nuclear is another. Geothermal could be a good solution to this problem.
- jeffrallen 6y ago
  Nuclear is not: it needs grid power to be able to run.
  - dctoedt 6y ago
    > Nuclear is not: it needs grid power to be able to run. But the "grid power" needed to run the reactor's control systems, etc., can almost surely be generated by the reactor itself while it's online, right? A naval nuclear reactor needs external power only to get started; when the ship is in port, this will typically be shore power from the grid, and either in port or at sea the external power could come from the onboard emergency diesel generators. When the reactor is started up, it will eventually "go critical," i.e., achieve self-sustaining fission. After that happens, one or more in-plant, steam-turbine electrical generators will be started and brought online to provide electrical power for the ship, including the reactor control systems, etc. [0] A similar arrangement seems likely to be used for civilian power plants. [1] [0] e.g., https://fas.org/man/dod-101/sys/ship/eng/reactor.html https://fas.org/man/dod-101/sys/ship/eng/reactor.html [1] e.g., https://www.elprocus.com/what-is-a-nuclear-power-plant-working-its-applications/ https://www.elprocus.com/what-is-a-nuclear-power-plant-worki...
cwkoss 6y ago
This article reeks of the author (and author's customers who read this blog) trying to justify away their internal guilt. Author is trying to paint a picture that "there is so much complexity this isn't easy to fix and no clear party to blame". Nonsense. There should be a price ceiling to consumers during natural disasters like this and regulations powerful enough to mitigate them more effectively. People are not able to make rational financial decisions when reducing power consumption means your 11 year old child could freeze to death. I think the death count from exposure (freezing to death) in TX during that period is now 4, and I expect that will climb as we get a more full picture. Meanwhile, many office buildings and rich neighborhoods had relatively uninterrupted power. What resulted in this class-stratification of power availability? An energy exec was recorded on a call saying that the storm was "very good for them" in reference to the high profits made during the storm. Should these companies be allowed to rake in cash on one side of the system while passing thousands of dollars bills to their consumers on the other side to profit off human misery and misfortune? On the other side, other energy companies skimped on winterization, leading to their gas lines freezing. Does anyone think "not being able to price gouge during the 4 most profitable days this year" is sufficient market-punishment to change behavior of these actors? ERCOT and the energy players built a system that killed several people and made hundreds of thousands miserable. Author says "ERCOT is not evil", but I disagree: intent is irrelevant if greed motivated lack or risk management results in this scale of death, misery and destruction. Everyone working to make energy a "free market" in Texas has a share of the blood on their hands from building a system that led to this outcome. There should be a thorough investigation and several people deserve to end up in prison as a result. But, being that this occurred in "free market" loving Texas, I won't be holding my breath. Perfect example of why basic human needs should not be run as a for-profit "free market".
ahepp 6y ago
>Those that chose Griddy, chose higher risk, which comes with high potential rewards but also high potential losses When I lived in the poor part of town, "energy deregulation" companies were always coming around, aggressively trying to get me to sign up on the spot. They never talked about risk, they just told me I could sign here to save $100s on my power bill. I asked them about the details and they just lied through their teeth. This was in MI, not TX. Maybe Griddy is different. I suspect they farm out signup to the same type of contractors. I think the idea of consumers responding to energy prices is nice, but has some pretty glaring issues. How many consumers are aware of hourly energy prices? How many on deregulated plans even understand that they pay more when usage is high? Can they react fast enough to changing prices? Leaving a light on during vacation should cost you some money, but it shouldn't wipe out your 401k. This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley. At the end of the day, it still comes down to losing power or losing 5 figures of cash that you probably don't have. Most people aren't in a position to be "homo economicus" when it comes to heating their home in a blizzard. It doesn't solve their problem to give them a choice between losing power, or going bankrupt. Many will choose to lose power, and die running their car in the garage just the same as if they had a blackout. If price sensitivity causes someone to set the AC on 80 the hottest day of the year, that's great. But expecting consumers to handle tail risk is a silly idea. I suspect you could get 99% of the effect by only passing a small price window to consumers, and managing the tail risk collectively.
- ryanmarsh 6y ago
  Griddy didn't have to beat the bricks like most REP's in Texas. Smart consumers aware of the risk beat a path to their door. Unfortunately, as with anything like this, the followers and fools soon showed up (reminiscent of $GME) and a good thing somehow suddenly became "a scam".
  - renewiltord 6y ago
    > Unfortunately, as with anything like this, the followers and fools soon showed up (reminiscent of $GME) and a good thing somehow suddenly became "a scam". Haha, isn't this just the thing? It's the same thing as with Kickstarter, Bountysource, numerous Google betas, etc. The risks are just sitting there visible as all heck, and fools will jump in blind and then scream when the scary event happens. It has been the best argument for paternalism I've ever seen: not to keep people safe from themselves, but to keep fools away from the rest of us so that we can make intelligent risky decisions. In fact, I've shifted my view of the accredited investor thing. I am so glad a bunch of blind followers can't just do something dumb and then ruin everything for the rest of us.
fasteddie31003 6y ago
Does this mean people with grid tie solar panels are going to get fat checks?
JumpCrisscross 6y ago
Griddy should have bought calls and passed along the premium cost and protection. I don’t know energy market options pricing, so maybe this is not viable. > the amount of money they are due as a result of this market design ($50 billion!!!) is truly staggering and disproportionate to the value created This is a screaming incentive for winterisation and energy storage. The premium is fine. It was mostly paid for by intermediaries.
- SomewhatLikely 6y ago
  Agreed on second point. The reward needs to be given today to incentivize future behavior. If market participants don't believe they will be rewarded they won't change their behavior.
toss1 6y ago
From the article: >> TL;DR: time of use rates are, on net, a Good Thing; markets are great, except when they fail; low risk isn’t the same as no risk; ... NO, this is not an example of "Free Markets" failing. This is Free Markets working exactly as designed. Demand massively increased, due to the cold weather Supply dramatically shrank due to the same cold weather The market is dynamically priced OF COURSE prices went hyperbolic Why wasn't this tail risk/opportunity anticipated by the various suppliers, so they pre-built their systems to withstand such cold weather, to be able to take advantage of the windfall? Because literally no one could afford to do so. The general market is a free-for-all low-cost race to the bottom. Invest more and you won't be competitive. Moreover, if enough people follow your strategy, you'll never see the windfall. No one can make the decision to invest in any quarter, so it never gets done. Yes, intelligent regulation is a pain in the arse, but free markets really do only one thing well - dynamically allocate resources and adjust pricing. Important, for sure. But a complex society also needs disaster planning and resource allocation, and to prevent Tragedies Of The Commons, both of which Free Markets(TM) will not only fail to solve, but will aggressively screw up.
nezirus 6y ago
For me this model looks insane, so you can save a few hundreds of bucks per year in electricity costs, but when extreme events happen (and they certainly will), you will wipeout decades of "savings". You either need some insurance or hard price cap. People are bad at estimating risks...
- pessimizer 6y ago
  More like scammers, who are taking no risks because they're just taking a percentage off the top, are bad at communicating risks.
JoshTko 6y ago
Basic goods should never be in unregulated markets. People are overwhelmed by these complex products. There is no reason why someone needs to spend a weekend trying to understand how much electricity will cost. US productivity is the real loser here as millions of people have to waste so much time.
Channel 6y ago
Looks like those who had power, could keep the heat going. Those that did not, had pipes burst from sub-zero temperatures. This flooded a lot of houses, even with water shut off. But those who had power are getting dinged with a ridiculous bill. Cascading failures, with no escape! Hope everyone can recover!
amluto 6y ago
> If you pair a retail energy provider like Griddy with an advanced suite of home efficiency technology, like programmable or price-responsive thermostats, you can have a building that automatically tailors its energy usage to the market environment One major piece of this puzzle that is, IMO, missing, is the lack of any reasonable, standardized way for a hypothetical smart home to communicate with the grid. With a smart meter, a properly ZigBee certified (why? probably some silly reason involving “security”) end user device can get current usage data from a smart meter. (And this data is blatantly wrong in any nontrivial circumstance.) But and end-user device has no way to negotiate pricing or load reduction with the grid short of going through some intermediary on the Internet. If I want to program my house to reduce consumption when prices are high, I can’t. An an example, a car should be able to tell the grid that it wants to buy x kWh at a maximum power of y kW between now and 5 AM, and the grid should be able to tell the car when to buy it. I don’t mean Tesla negotiating this on behalf of itself or its customers - I mean the car or the house talking to the meter or the utility. No unnecessary or unavoidable intermediaries please. It doesn’t help that PG&E does not accurately know the topology of its own grid. Oops.
pierrebai 6y ago
Combining real-time data, market with speculators and a product that demand immediate, real-time delivery is a recipe for disaster. When demand exceed supply, given the real-time nature of the product speculators can come in a take you to the cleaner if they had any chance to beat you to foretelling this would happen. As I understand it, ERCOT puts a $9000 per MWh to put a limit on speculation, but then what happens is you have to take people off the grid. The desire to "maximize efficiency" by surfing the demand curve with real-time data is not worth worth the expense of smart meters and risks. Dumb demand curves have another advantage: the utility is forced to over-estimate demand, creating a built-in safety margin.
guyzero 6y ago
From the article: "Consumers who aren’t exposed to price risk have no fundamental incentives to conserve energy in times of need." But, at the same time, consumers that have no visibility into their current electricity prices are unable to alter their behaviour. Until there's extremely high-resolution, real-time price transparency, this system is destined to fail. Also consumers have base loads just like generators have base loads: you might defer doing laundry, but no one is going to unplug their refrigerator during a electricity price surge. Again, this simplistic spot pricing scheme is destined to fail if it doesn't meet consumer's need to have predictable baseline consumption rates. I weakly agree with the author here that demand-based pricing is in everyone's interest, but that said, last week in Taxas was a systemic failure of immense proportions and everyone involved in planning Texas' electricity grid should be ashamed.
feralimal 6y ago
Smart meters are an essential part of the technocratic control structure. It is imperative that technocrats (those best able to manage the populations) have all the information about individuals and household electric and water usage, so that they are able to finely control and manage these precious resources. It can't be long until we start to see value judgements about usage - 'your electricity usage for a heating or some such, is too high or beyond your allocation, so that has been charged to you at the regulatory tariff rate. Do you want us to send you a tutorial about how to better manage your energy usage? Would you like to move to a premium energy rate?'
- zbrozek 6y ago
  That's already exactly what tiered pricing is.
  - feralimal 6y ago
    Tiered pricing doesn't make a judgement on what you are using. It doesn't say "you're using your oven or A/C too much". What I would like to know, is are smart meter capable of refusing a demand for electricity for a device. So, say the company wants to use minimal electricity, will it allow energy for fridges and freezers, but not for A/C and TVs?
bdavis__ 6y ago
griddy customer here. I entered into the contract of my own free will. $1/KW was in my mind as the highest it could go, and for me that was acceptable. So, about $100 a day is what I thought my downside was. Saved a lot over the last 3 years. On Sunday night, griddy was taking $100 payments from my bank account repeatedly. Given the forecast, I jumped on the web and moved to a different provider (I must stay with them for a month, if I leave earlier there is a $150 penalty). Total cost for electricity during this time, just under $700. My usual bill was $70 to $100. this consumer understood the risks. i knew what i was getting into. and i jumped when it became more expensive than i was willing to pay. those that say "changing providers is cheating", i understand your point. ny action was in my own self interest.
dreamcompiler 6y ago
The original vision of the Smart Grid (by competent engineers at EPRI and elsewhere) was to ensure better reliability, resilience, and efficiency of the grid under a mix of new generation, transmission, and distribution technologies. Unfortunately--as often happens--managers took the buzzword and changed its meaning to "A Good Way for Us to Make More Money by Throwing Smart Meters on Every House." Any thought about increased reliability and resilience went out the window. The Smart Grid can still deliver on its original promise of a dependable, bidirectional electricity generation and delivery system. But in order for it to do so we're going to have to get rid of all the decision makers who only care about squeezing short-term profit out of the idea. It's going to require thoughtful, long-term investment.
teeray 6y ago
Most unexpected high costs like this are covered by some insurance product. Why is this an exception? For example: consumer bets that they will have an insane bill at some point, policy writer bets they won’t and a premium for this bet is established. Premiums can be adjusted by the $/KW threshold at which point the policy takes effect, and inevitably some deductible.
the_real_sparky 6y ago
There are a couple of important things to note here that I haven’t seen get much discussion. First, assuming that residential customers can understand the pricing dynamics that are going on is a really bad assumption. It is very complex because there is an interplay between their natural gas service and their electric service, both of which are buying gas from the market on the customer’s behalf. The agents for each company are contractually obligated to supply energy to their customers at any cost - and this is a real problem in this type of situation. In effect, the customer is bidding against themselves via the gas & electric companies. Even in some ideal world where the consumers have full real-time price transparency, it would be extremely difficult for the customer to understand the costs of their actions and the best balance between the two services. Second, it should be noted that the astronomical gas and electric prices in those markets did not really accomplish anything. They brought on very marginal amounts of additional energy (beyond about 10x average prices there is almost no meaningful additional capacity that can come online because nobody in their right mind would invest in infrastructure that could only operate at those prices). Those prices also did not provide useful information that residential customers could evaluate and act on on the demand side (price sensitive industrial and large commercial customers would shut down at far lower prices than was seen). Ultimately, what occurred was an emergency situation and disaster. Pricing and consumption controls should have been initiated when energy emergency alerts were declared in the gas and electric markets, as the market structure is not setup to operate effectively during these situations. It was a total failure. The only things that worked were the reliability plans that grid operators have in place to disconnect customers in order to prevent complete failure of the electric grid. Ultimately, in an emergency/disaster situation there should be a different set of rules that determines who gets the energy and caps the cost. Note that the winterization discussions going on elsewhere are also extremely important, but those problems are already being covered well.

67 points by astanway 6y ago

xwdv 6y ago

If you're feeding power back into the grid are you getting paid at these rates?

astanway 6y ago
For wholesale players: yes. If you're a retailer and you buy an electricity future and then only use half of it across your customer base, you sell the remainder at real time prices. And for generator, selling real time power is the entire business model. For consumers: no, not generally. Some markets have schemes to sell leftover solar power at real time prices, but I believe these are being phased out. Both grids and markets are by and large not set up yet for full two-way markets between consumers and producers.
- makomk 6y ago
  I believe Octopus Energy in the UK lets people both buy power and sell it back to the grid at time-dependent pricing, though I'm not sure how it works exactly and I'm pretty sure technically they're two separate contracts.
savanaly 6y ago
This is a good point. Markets sting when they skyrocket to high prices. But the sting is supposed to be matched bit for bit by the benefits-- incentivizing people to cut back when they should (something most people would only begrudgingly acknowledge as a benefit when it's happening to them, if acknowledge it at all), and incentivizing innovative behaviors to exploit it to make a quick buck. I haven't heard much about that last part; like you said, it would be great if the market works such that on the margin a player can exploit that price to make a quick buck (by, e.g. rigging some kind of battery up before a storm that's coming and making bank off the arbitrage when the storm hits by emptying the battery back in to the grid). Now maybe the transaction costs or economies of scale or whatever make that infeasible-- if so too bad-- but it's worth remembering this is half the benefit of a market system.
timgebrally 6y ago
I have solar on my house and in IL we get paid via "net metering": https://www.citizensutilityboard.org/illinois-net-metering/ https://www.citizensutilityboard.org/illinois-net-metering/ . The idea is you size a system for your annual energy consumption, and then you don't pay for electricity for the year. If you sold the power back for real-time pricing you'd need a much larger system than your annual consumption. Net metering basically lets you sell the power back at a retail price, not a wholesale price.
- samkater 6y ago
  From what I understand there is a lot of variation in providers. As I understand SDGE's Net Metering policy(https://www.sdge.com/residential/solar/getting-started-with-solar https://www.sdge.com/residential/solar/getting-started-with-...), you sell back power at retail prices only for the current month's billing cycle. Excess energy created within a billing cycle is "true-upped" at wholesale prices which can be applied to other month's billing cycles. I would also be curious in how the Texas case works. Especially if the grid is down, would it be able to accept the energy you are producing?
  - bluGill 6y ago
    The rules in Illinois are you net meter for the year. If you make more than you use in a year that is free power for the utility. If you want a different deal you need a contract with the utility (In general you need to be in the millions of dollars/year range to be of interest). In Texas it is more complex as each provider can give you a different deal for residential systems. When the grid is down you can't sell power back. The whole system shuts down. Though if you have a whole house battery backup you can use that instead of the grid (if it is built for it - solar gets weird if you aren't using exactly as much power as you make so you need something to use or make up the difference).
xur17 6y ago
I was reading about Griddy, and my understanding is that you can do exactly this with them [0]. [0] https://www.reddit.com/r/griddy/comments/lnrxn8/who_is_coming_back/go2cliq/ https://www.reddit.com/r/griddy/comments/lnrxn8/who_is_comin...

mortenjorck 6y ago

Is there a reason why time-of-use systems can’t have a customer-defined price limit, beyond which they opt into a blackout? The sense I got from the stories of people suddenly facing five-figure power bills is that most would have gladly spent a night or two with propane and candles rather than cleaning out their savings.

londons_explore 6y ago
Laws generally prevent this (generally a customer's supply can only be cut off with a long and precise legal procedure). It's possible it might be doable with a user override.
- Spivak 6y ago
  I think you have this backwards. This isn't the power company shutting off your power. This is telling your agent (in this case Griddy) to stop buying power under some conditions that you define.
  - londons_explore 6y ago
    I understand... But in the eyes of the law, Griddy is your power company, and their equipment shutting off your supply might break a lot of laws about disconnecting people without giving the requisite notice, legal procedure, etc. Where do you draw the line? "Griddy, please turn my power off if the price goes above $1/kwh"... "Griddy, please turn the power off if I forget to pay the bill.", "Griddy, I'll take a $10/month discount if the power gets turned off when my bill is paid late?", "Griddy, I want to use non-ripoff plan, so I'm happy for you to turn my power off the minute I pay late". See how it isn't really feasible to stop power companies forcibly illegally disconnecting debtors if you allow a debtor to agree to be disconnected voluntarily?
    - nybble41 6y ago
      If the property owner has a button to override the cut-off and turn the power back on then that should satisfy any legal requirements related to unilateral disconnection of power. The disconnect should happen on the customer's side anyway. The power company just needs to provide accurate information about the current price in a form that can be used by an automated switch. Important circuits could be placed on a separate panel with a higher cut-off point.

jerf 6y ago

I am not in Texas, so a couple of questions for those who may be affected by this story, because I've been wondering about this: 1. If you are on this plan, what is your visibility into current prices for electricity? e.g., are there any alerts that you could have signed up, even if you hadn't before? 2. Have you been bitten by unexpected high prices before, perhaps in the summer? 3. Prior to this event, would you say you saved money overall with Gridly?

egwor 6y ago
To 1.: didn't one provider email their client base to warn them of this?
- kingaillas 6y ago
  Yes that was Griddy that emailed their client base. Whether or not they did it and gave their customers sufficient time to do the switch is another matter (i.e. close of business day timing, normal delays involved in new account enrollment, and so on). EDIT: To be clear I'm not throwing Griddy under the bus for sending email late or without more time. I think they were doing what they could for their customers upon seeing the wholesale prices skyrocket. But the reality is that it takes time to switch services even under normal conditions, without thousands of others trying to do the same.
  - gregw2 6y ago
    I heard on the news here in Texas that reporters indicated it takes a few days to switch, so while Griddy sent the email, their customers were not able to really act on the advice amidst the crisis. That said, I think it was bad advice from Griddy for a second reason. I think they should have told their customers to just go to their house fuse box and shut off their power to avoid the inevitable huge bill. I'm not sure why others haven't mentioned this but the customers did ultimately have that recourse. This is the unfortunate but logical thing to do when your 6c/kWh bill grows to $9/kWh. And at least you can intermittently turn it back on when needed to heat your house for a short bit, etc which is still better than being totally out for 3 days as many people here were.

tehwebguy 6y ago

There are some interesting details here but let's be suuuper clear, nobody in the residential sector consented to a 12,000% increase in power costs or a $5,000 - $16,000 power bill this month. I think the article tries extremely hard to forgive everyone involved aside from the residents who have now been completely devastated by this. The only real acknowledgement that residents have truly suffered something they didn't deserve is sandwiched between statements completely clearing Griddy & ERCOT of wrongdoing: > The point is that while Griddy customers should definitely be entitled to relief, Griddy is not evil. Nor is ERCOT.

techsupporter 6y ago
Exactly. In my experience, there are exactly two types of customers on the kinds of plans like Griddy offers: a) people who are heavily into cost-optimization and have spent the cash to automate their living quarters to take advantage of wholesale price swings; and b) people who are trying to stretch a dollar because a single dollar is all they have left. For people in that second category, the dollar broke and smacked them in the face. I am by no means calling people stupid for doing this; they believed the sales pitch and either did not understand (because the wholesale pricing model is actually complex) or were not told the massive potential downsides. And when the cost of keeping where you live at a livable temperature runs into the mid-three-digits per month during the summer, you're going to jump at the idea of slashing that by two-thirds. This is consent in the same way that clicking "agree" on a 15,000-word EULA is consent. It isn't.
- ahepp 6y ago
  I used to have these guys (EDIT: energy dereg companies, not griddy specifically) knocking on my door regularly with a pen, asking me to sign a contract for real time pricing literally on the spot, because I could save a bunch of money on my bill I would be shocked if there is any energy deregulation company that doesn't resort to this, because it's the basic result of hiring contractors and paying them on commission
  - paulgb 6y ago

jonas21 6y ago

I didn't see this mentioned in the article, but there are many time-of-use plans that offer variable rates without exposing the consumer to additional risk. For example, my electric plan has different rates for "peak" (4pm - 9pm), "super off-peak" (12am - 6am), and "off-peak" (everything else). But these rates are fixed, so I know in advance how much I'll need to pay. This still incentivizes me to shift my usage to lower-demand times, flattening the demand curve under typical conditions. But it doesn't expose me to tail risk.

jandrese 6y ago
That means you're not on the market. You just have a more complicated fixed rate plan.
- jonas21 6y ago
  I understand that -- but it seems like the main point of the article is: > I believe we ultimately need some degree of real time price exposure for consumers if we are to induce these kinds of widespread energy efficiency investments, because it can and does encourage significant reductions in individual electricity consumption during times of peak grid demand, which is good for the grid and good for the planet. And I'm just pointing out that you can get most of the benefit without exposing consumers to additional risk, and that such plans are already widely available, at least where I live.
  - jandrese 6y ago
    But also as you pointed out that doesn't really help in cases like last week because you're not being directly affected by this market shift. In fact your plan was probably counterproductive since the cheapest power to you came when it was most expensive to the operator--over night.
  - cwkoss 6y ago
    This is an important point, because the author of the post is essentially trying to argue that letting Texans either freeze to death or be price gouged is somehow necessary to fight climate change. Regulations would have solved this. Why does the word "regulation" only appear in this article once? Make winterization standards a requirement of participating in the market.

jandrese 6y ago

It strikes me that Texas is suffering the same sort of problems that companies that switch to just-in-time delivery do. When everything is working they're more efficient and can out-compete their neighbors, but since they're running with little to no safety margin it only takes one incident to cause immediate disruption to the line. Of course when the consequence of a disruption is you miss your production targets for the week it's not so bad. When the consequence is thousands of people freezing to death maybe you should step back and ask if this is really what you want. Is it worth saving a fraction of a penny per kWh if it means the system can't budget for extreme events or even long term maintenance? Markets are extremely good at optimizing for the lowest cost (most efficiently) solution, but they're no good for planning for unusual events or for handling externalities. At some point a government needs to step in and set some (unpopular) ground rules so the players in the market don't have to race all the way to the bottom to stay competitive.

aqme28 6y ago
See also: hospitals running at close full capacity in a normal year[1], and then a pandemic comes along. [1]: https://www.usnews.com/news/health-news/articles/2020-03-26/us-hospital-beds-were-already-maxed-out-before-coronavirus-pandemic https://www.usnews.com/news/health-news/articles/2020-03-26/...
- bluGill 6y ago
  Perhaps, but health care is so heavily managed nobody can call it a market. Most communities have a limit on how many hospital beds that are allowed which means that there isn't even an opportunity to do much better.
  - jandrese 6y ago
    That's kind of the core of the problem with healthcare in the US. We treat it like a market where you can't see the prices and where customer are forced to buy the product or die. Then we wonder why it's so expensive.

martinald 6y ago

In the UK energy supplier Octopus has an "agile" tariff which is similar to griddy (we are increasingly getting negative prices here). However, it has a 35p/kWh price cap (2-3x average rates). I don't understand why Griddy didn't do something similar. Even a $1/kWh price cap would have really helped them.

mytailorisrich 6y ago
In the UK, consumer and contract law mean that it is not possible, afaik, to have 'open-ended' contracts. I.e. a party to a contract must always be able to determine how much entering into the contract is going to cost them and/or they must be be able to leave with a capped and known worst-case. That's why there are always caps or capped increases.
AnssiH 6y ago
Similar with my provider in Finland, capped at 0.085€/kWh (approx. 2x avg): https://www.sahkolaitos.fi/en/products/tuntisahko/ https://www.sahkolaitos.fi/en/products/tuntisahko/
- martinald 6y ago
  Wow, those are some great prices! How come Finnish electricity is so cheap?

TrackerFF 6y ago

Can anyone tell me: Why is there no automatic stop-limit the customers can opt into? Once the $/KWh passes some threshold, power either gets turned off, or they get some short grace period to figure out whether they want to continue or stop. Price runs like these are things consumers will experience probably a handful of times in their lifetimes. If they run wild, they can financially ruin someone. In the grand scheme of things, these are black-swan events. There should be safety guards in place.

bluGill 6y ago
Because nobody thought they would need it until it was too late. Note that everyone at risk of this even was told beforehand to switch providers now, so there was an "easy out" if you were paying attention (In theory easy, in practice, while it isn't never easy). Or you could have turned your own power off - When you get a time of use contract the point is you want to adjust your demand to fit the price, so anyone who got a large bill failed to do their end of the bargain.
_jal 6y ago
Creating complicated pricing automation for home consumers for rare situations when they're exposed to brutal pricing in a life-or-death crisis is not the solution. If anything, you'll be causing more chaos, as people grapple with rules they don't remember setting up. The safety guards tend to be laws saying, "you can't sell those". Consumer utilities should be boring and predictable, and need to be legally controlled to stay that way.

uadnils 6y ago

1. The statement "it’s clear that those high prices weren’t doing their job" and subsequent disagreement with raising the price cap does not make sense to me. Any artificial price cap seems to limit the effectiveness of a market. From the producer's side, it limits the incentive to model and capture these tail events (e.g. winterize). From the consumer's side, it limits the incentive to reduce consumption. Is my perspective off here? 2. Is it possible to subscribe to two (or n) energy plans? Imagine subscribing to a wholesale plan (e.g. Griddy) and a fixed-rate plan and switching between them whenever wholesale prices rise above the fixed rate. Are there legal or practical reasons this can't happen?

function_seven 6y ago
Practical reason is that the fixed-rate provider would not want to do business with you. You would only use their service when they lose money. So they’d require exclusivity as a condition for service.
cwkoss 6y ago
For #2, I bet that it would drastically cut into energy company profits and thus is not politically practical in TX.
- function_seven 6y ago
  Even a non-profit utility would not agree to be the fixed rate provider in this scenario. It would be a guaranteed money loser, for the same reason that I can’t buy auto insurance just after I crash my car, or health coverage just after I’m diagnosed with cancer.
  - evancox100 6y ago
    I mean, except you can do the latter. The whole "must cover pre-existing conditions" thing. Market still manages to function, and even without the individual mandate. How exactly? ¯\_(ツ)_/¯
    - 6y ago

woeirua 6y ago

The big takeaway from all of this should be the critical cyclic dependency of natural gas power plants. That is, if your primary source of power is natural gas, then you must have reliable power to the natural gas wells to produce natural gas. If the power becomes unreliable, then natural gas pressures in the pipelines drop to unsuitable levels to run large generators. As the generators trip due to adverse safety conditions, then your power generation decreases even further, thereby making the natural gas pipeline pressure even worse. It's entirely possible to foresee a cycle wherein a grid powered mostly or entirely by natural gas could end up unable to maintain any power generation under the right circumstances. This is a very strong and compelling argument for maintaining some core baseload generation capacity that is completely independent of existing power generation. Batteries could be one solution. Nuclear is another. Geothermal could be a good solution to this problem.

jeffrallen 6y ago
Nuclear is not: it needs grid power to be able to run.
- dctoedt 6y ago
  > Nuclear is not: it needs grid power to be able to run. But the "grid power" needed to run the reactor's control systems, etc., can almost surely be generated by the reactor itself while it's online, right? A naval nuclear reactor needs external power only to get started; when the ship is in port, this will typically be shore power from the grid, and either in port or at sea the external power could come from the onboard emergency diesel generators. When the reactor is started up, it will eventually "go critical," i.e., achieve self-sustaining fission. After that happens, one or more in-plant, steam-turbine electrical generators will be started and brought online to provide electrical power for the ship, including the reactor control systems, etc. [0] A similar arrangement seems likely to be used for civilian power plants. [1] [0] e.g., https://fas.org/man/dod-101/sys/ship/eng/reactor.html https://fas.org/man/dod-101/sys/ship/eng/reactor.html [1] e.g., https://www.elprocus.com/what-is-a-nuclear-power-plant-working-its-applications/ https://www.elprocus.com/what-is-a-nuclear-power-plant-worki...

cwkoss 6y ago

This article reeks of the author (and author's customers who read this blog) trying to justify away their internal guilt. Author is trying to paint a picture that "there is so much complexity this isn't easy to fix and no clear party to blame". Nonsense. There should be a price ceiling to consumers during natural disasters like this and regulations powerful enough to mitigate them more effectively. People are not able to make rational financial decisions when reducing power consumption means your 11 year old child could freeze to death. I think the death count from exposure (freezing to death) in TX during that period is now 4, and I expect that will climb as we get a more full picture. Meanwhile, many office buildings and rich neighborhoods had relatively uninterrupted power. What resulted in this class-stratification of power availability? An energy exec was recorded on a call saying that the storm was "very good for them" in reference to the high profits made during the storm. Should these companies be allowed to rake in cash on one side of the system while passing thousands of dollars bills to their consumers on the other side to profit off human misery and misfortune? On the other side, other energy companies skimped on winterization, leading to their gas lines freezing. Does anyone think "not being able to price gouge during the 4 most profitable days this year" is sufficient market-punishment to change behavior of these actors? ERCOT and the energy players built a system that killed several people and made hundreds of thousands miserable. Author says "ERCOT is not evil", but I disagree: intent is irrelevant if greed motivated lack or risk management results in this scale of death, misery and destruction. Everyone working to make energy a "free market" in Texas has a share of the blood on their hands from building a system that led to this outcome. There should be a thorough investigation and several people deserve to end up in prison as a result. But, being that this occurred in "free market" loving Texas, I won't be holding my breath. Perfect example of why basic human needs should not be run as a for-profit "free market".

ahepp 6y ago

>Those that chose Griddy, chose higher risk, which comes with high potential rewards but also high potential losses When I lived in the poor part of town, "energy deregulation" companies were always coming around, aggressively trying to get me to sign up on the spot. They never talked about risk, they just told me I could sign here to save $100s on my power bill. I asked them about the details and they just lied through their teeth. This was in MI, not TX. Maybe Griddy is different. I suspect they farm out signup to the same type of contractors. I think the idea of consumers responding to energy prices is nice, but has some pretty glaring issues. How many consumers are aware of hourly energy prices? How many on deregulated plans even understand that they pay more when usage is high? Can they react fast enough to changing prices? Leaving a light on during vacation should cost you some money, but it shouldn't wipe out your 401k. This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley. At the end of the day, it still comes down to losing power or losing 5 figures of cash that you probably don't have. Most people aren't in a position to be "homo economicus" when it comes to heating their home in a blizzard. It doesn't solve their problem to give them a choice between losing power, or going bankrupt. Many will choose to lose power, and die running their car in the garage just the same as if they had a blackout. If price sensitivity causes someone to set the AC on 80 the hottest day of the year, that's great. But expecting consumers to handle tail risk is a silly idea. I suspect you could get 99% of the effect by only passing a small price window to consumers, and managing the tail risk collectively.

ryanmarsh 6y ago
Griddy didn't have to beat the bricks like most REP's in Texas. Smart consumers aware of the risk beat a path to their door. Unfortunately, as with anything like this, the followers and fools soon showed up (reminiscent of $GME) and a good thing somehow suddenly became "a scam".
- renewiltord 6y ago
  > Unfortunately, as with anything like this, the followers and fools soon showed up (reminiscent of $GME) and a good thing somehow suddenly became "a scam". Haha, isn't this just the thing? It's the same thing as with Kickstarter, Bountysource, numerous Google betas, etc. The risks are just sitting there visible as all heck, and fools will jump in blind and then scream when the scary event happens. It has been the best argument for paternalism I've ever seen: not to keep people safe from themselves, but to keep fools away from the rest of us so that we can make intelligent risky decisions. In fact, I've shifted my view of the accredited investor thing. I am so glad a bunch of blind followers can't just do something dumb and then ruin everything for the rest of us.

fasteddie31003 6y ago

Does this mean people with grid tie solar panels are going to get fat checks?

JumpCrisscross 6y ago

Griddy should have bought calls and passed along the premium cost and protection. I don’t know energy market options pricing, so maybe this is not viable. > the amount of money they are due as a result of this market design ($50 billion!!!) is truly staggering and disproportionate to the value created This is a screaming incentive for winterisation and energy storage. The premium is fine. It was mostly paid for by intermediaries.

SomewhatLikely 6y ago
Agreed on second point. The reward needs to be given today to incentivize future behavior. If market participants don't believe they will be rewarded they won't change their behavior.

toss1 6y ago

From the article: >> TL;DR: time of use rates are, on net, a Good Thing; markets are great, except when they fail; low risk isn’t the same as no risk; ... NO, this is not an example of "Free Markets" failing. This is Free Markets working exactly as designed. Demand massively increased, due to the cold weather Supply dramatically shrank due to the same cold weather The market is dynamically priced OF COURSE prices went hyperbolic Why wasn't this tail risk/opportunity anticipated by the various suppliers, so they pre-built their systems to withstand such cold weather, to be able to take advantage of the windfall? Because literally no one could afford to do so. The general market is a free-for-all low-cost race to the bottom. Invest more and you won't be competitive. Moreover, if enough people follow your strategy, you'll never see the windfall. No one can make the decision to invest in any quarter, so it never gets done. Yes, intelligent regulation is a pain in the arse, but free markets really do only one thing well - dynamically allocate resources and adjust pricing. Important, for sure. But a complex society also needs disaster planning and resource allocation, and to prevent Tragedies Of The Commons, both of which Free Markets(TM) will not only fail to solve, but will aggressively screw up.

nezirus 6y ago

For me this model looks insane, so you can save a few hundreds of bucks per year in electricity costs, but when extreme events happen (and they certainly will), you will wipeout decades of "savings". You either need some insurance or hard price cap. People are bad at estimating risks...

pessimizer 6y ago
More like scammers, who are taking no risks because they're just taking a percentage off the top, are bad at communicating risks.

JoshTko 6y ago

Basic goods should never be in unregulated markets. People are overwhelmed by these complex products. There is no reason why someone needs to spend a weekend trying to understand how much electricity will cost. US productivity is the real loser here as millions of people have to waste so much time.

Channel 6y ago

Looks like those who had power, could keep the heat going. Those that did not, had pipes burst from sub-zero temperatures. This flooded a lot of houses, even with water shut off. But those who had power are getting dinged with a ridiculous bill. Cascading failures, with no escape! Hope everyone can recover!

amluto 6y ago

> If you pair a retail energy provider like Griddy with an advanced suite of home efficiency technology, like programmable or price-responsive thermostats, you can have a building that automatically tailors its energy usage to the market environment One major piece of this puzzle that is, IMO, missing, is the lack of any reasonable, standardized way for a hypothetical smart home to communicate with the grid. With a smart meter, a properly ZigBee certified (why? probably some silly reason involving “security”) end user device can get current usage data from a smart meter. (And this data is blatantly wrong in any nontrivial circumstance.) But and end-user device has no way to negotiate pricing or load reduction with the grid short of going through some intermediary on the Internet. If I want to program my house to reduce consumption when prices are high, I can’t. An an example, a car should be able to tell the grid that it wants to buy x kWh at a maximum power of y kW between now and 5 AM, and the grid should be able to tell the car when to buy it. I don’t mean Tesla negotiating this on behalf of itself or its customers - I mean the car or the house talking to the meter or the utility. No unnecessary or unavoidable intermediaries please. It doesn’t help that PG&E does not accurately know the topology of its own grid. Oops.

pierrebai 6y ago

Combining real-time data, market with speculators and a product that demand immediate, real-time delivery is a recipe for disaster. When demand exceed supply, given the real-time nature of the product speculators can come in a take you to the cleaner if they had any chance to beat you to foretelling this would happen. As I understand it, ERCOT puts a $9000 per MWh to put a limit on speculation, but then what happens is you have to take people off the grid. The desire to "maximize efficiency" by surfing the demand curve with real-time data is not worth worth the expense of smart meters and risks. Dumb demand curves have another advantage: the utility is forced to over-estimate demand, creating a built-in safety margin.

guyzero 6y ago

From the article: "Consumers who aren’t exposed to price risk have no fundamental incentives to conserve energy in times of need." But, at the same time, consumers that have no visibility into their current electricity prices are unable to alter their behaviour. Until there's extremely high-resolution, real-time price transparency, this system is destined to fail. Also consumers have base loads just like generators have base loads: you might defer doing laundry, but no one is going to unplug their refrigerator during a electricity price surge. Again, this simplistic spot pricing scheme is destined to fail if it doesn't meet consumer's need to have predictable baseline consumption rates. I weakly agree with the author here that demand-based pricing is in everyone's interest, but that said, last week in Taxas was a systemic failure of immense proportions and everyone involved in planning Texas' electricity grid should be ashamed.

feralimal 6y ago

Smart meters are an essential part of the technocratic control structure. It is imperative that technocrats (those best able to manage the populations) have all the information about individuals and household electric and water usage, so that they are able to finely control and manage these precious resources. It can't be long until we start to see value judgements about usage - 'your electricity usage for a heating or some such, is too high or beyond your allocation, so that has been charged to you at the regulatory tariff rate. Do you want us to send you a tutorial about how to better manage your energy usage? Would you like to move to a premium energy rate?'

zbrozek 6y ago
That's already exactly what tiered pricing is.
- feralimal 6y ago
  Tiered pricing doesn't make a judgement on what you are using. It doesn't say "you're using your oven or A/C too much". What I would like to know, is are smart meter capable of refusing a demand for electricity for a device. So, say the company wants to use minimal electricity, will it allow energy for fridges and freezers, but not for A/C and TVs?

bdavis__ 6y ago

griddy customer here. I entered into the contract of my own free will. $1/KW was in my mind as the highest it could go, and for me that was acceptable. So, about $100 a day is what I thought my downside was. Saved a lot over the last 3 years. On Sunday night, griddy was taking $100 payments from my bank account repeatedly. Given the forecast, I jumped on the web and moved to a different provider (I must stay with them for a month, if I leave earlier there is a $150 penalty). Total cost for electricity during this time, just under $700. My usual bill was $70 to $100. this consumer understood the risks. i knew what i was getting into. and i jumped when it became more expensive than i was willing to pay. those that say "changing providers is cheating", i understand your point. ny action was in my own self interest.

dreamcompiler 6y ago

The original vision of the Smart Grid (by competent engineers at EPRI and elsewhere) was to ensure better reliability, resilience, and efficiency of the grid under a mix of new generation, transmission, and distribution technologies. Unfortunately--as often happens--managers took the buzzword and changed its meaning to "A Good Way for Us to Make More Money by Throwing Smart Meters on Every House." Any thought about increased reliability and resilience went out the window. The Smart Grid can still deliver on its original promise of a dependable, bidirectional electricity generation and delivery system. But in order for it to do so we're going to have to get rid of all the decision makers who only care about squeezing short-term profit out of the idea. It's going to require thoughtful, long-term investment.

teeray 6y ago

Most unexpected high costs like this are covered by some insurance product. Why is this an exception? For example: consumer bets that they will have an insane bill at some point, policy writer bets they won’t and a premium for this bet is established. Premiums can be adjusted by the $/KW threshold at which point the policy takes effect, and inevitably some deductible.

the_real_sparky 6y ago

There are a couple of important things to note here that I haven’t seen get much discussion. First, assuming that residential customers can understand the pricing dynamics that are going on is a really bad assumption. It is very complex because there is an interplay between their natural gas service and their electric service, both of which are buying gas from the market on the customer’s behalf. The agents for each company are contractually obligated to supply energy to their customers at any cost - and this is a real problem in this type of situation. In effect, the customer is bidding against themselves via the gas & electric companies. Even in some ideal world where the consumers have full real-time price transparency, it would be extremely difficult for the customer to understand the costs of their actions and the best balance between the two services. Second, it should be noted that the astronomical gas and electric prices in those markets did not really accomplish anything. They brought on very marginal amounts of additional energy (beyond about 10x average prices there is almost no meaningful additional capacity that can come online because nobody in their right mind would invest in infrastructure that could only operate at those prices). Those prices also did not provide useful information that residential customers could evaluate and act on on the demand side (price sensitive industrial and large commercial customers would shut down at far lower prices than was seen). Ultimately, what occurred was an emergency situation and disaster. Pricing and consumption controls should have been initiated when energy emergency alerts were declared in the gas and electric markets, as the market structure is not setup to operate effectively during these situations. It was a total failure. The only things that worked were the reliability plans that grid operators have in place to disconnect customers in order to prevent complete failure of the electric grid. Ultimately, in an emergency/disaster situation there should be a different set of rules that determines who gets the energy and caps the cost. Note that the winterization discussions going on elsewhere are also extremely important, but those problems are already being covered well.