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Electricity markets have been exhaustively researched for ~2 decades (the type we have in the US) and even longer for economic power systems in general. All th

Electricity markets have been exhaustively researched for ~2 decades (the type we have in the US) and even longer for economic power systems in general. All that to say the way things are done are not perfect, but they have had a lot of brilliant people looking into them for a long time. There is a lot of economic theory out there on the usage of short run marginal costs for offers and renewables are insanely cheap in comparison to most other technologies. When you talk about paying for a nuke plant, but not consuming 100% of it's output, that's not exactly what I'm talking about. I would guess that many nukes simply have to run and can't be committed/decommitted like many other conventional technologies. They essentially become a price taker at that point and whatever they are making is likely not enough to cover what they need to stay in business. I hope that's more clear. Also, zero or negative prices are indeed becoming increasingly common in certain parts of the US. Edit: the capacity factors I saw posted publicly for nukes in 2020 weren't near as bad as I thought. Regardless, there are still a lot of planned retirements as I understand it, in the next few years. With Southern Company's Vogtle way over budget and behind schedule, I can't imagine another nuke being built in the US of that kind anytime soon either.

rsj_hn 5y ago
> Electricity markets have been exhaustively researched for ~2 decades (the type we have in the US) and even longer for economic power systems in general. Do you think these cost functions properly price disruptions? I'm saying this because the US is an order of magnitude less reliable than in Europe, and most of these costs are pushed onto consumers. E.g. When the power goes out and I have to throw away food or lose a day of work, PG&E has never compensated me for that. It's externalized. Now imagine a scenario where lots of people rely on the grid to charge their cars. I'm really skeptical of the obsessive hyper-optimization that's going on. If you have a situation where there is an extremely cheap energy provider that is highly unreliable, it could drive out of business the more expensive, reliable provider, and that needs to be taken into account. The zero or negative spot prices that were common in Texas as a result of windpower look to be an example of that pathology at work.
- 7thaccount 5y ago
  They do have "scarcity pricing" which comes up when energy is either deficit or the required reserves are. ERCOT in particular has something like $9000/MWh.
  - rsj_hn 5y ago
    So let's go with this number. A price is the result of optimizing some cost function, so let's see if the underlying cost function correctly measures the cost of a disruption. 9K/MWh would attribute 1 day of electricity as being worth $108 (assuming standard per-capita usage of 12kW). So for a single living alone, that's a bad deal, as suffering a power outage for 1 day and then being given $108 will not make them whole -- it wont even pay for the spoiled food, let alone the inconvenience of being without AC or internet for a day. For a household of 2.5, they would get $270, which would pay for the spoiled food and inconvenience of buying it and maybe get $30 left over for the inconvenience of no A.C., cell phone running out, not being able to use your computer or internet, do your laundry, perhaps not being able to use your mobile phone, etc. And we aren't even assuming PEV or people working from home. Then they would also lose 1 day of wages. So it would seem to me that just to make someone whole you should probably double or triple that, say to 20K/MWh, but then this is supposed to be a penalty rate, so it should cost more than what it would take to make a household whole, because we don't want the utility to be indifferent between making the household whole and providing the electricity, we want the utility to be heavily incentivized to avoid the disruption.
    - 7thaccount 5y ago
      These are wholesale prices, not retail, but yes the two are linked. $9000/MWh isn't crazy for a few intervals once a year, but if a generator clears 200 MW for each hour of the day for a day in the day ahead market and then has issues and can't provide that power in the real time market, it has to buy back that power at the spot price. That can get insanely expensive fast. Now imagine the owner of that generator has other generators in the same boat and it just stacks. These aren't trivial prices. Similarly, the load serving entities have to buy power at that spot price if they don't have it locked in at a lower price in the forward market (hard to do when events occur over multiple days). A little googling will turn up some chatter about many of those companies nearly defaulting from the ERCOT scarcity pricing during the February event.

rsj_hn 5y ago

> Electricity markets have been exhaustively researched for ~2 decades (the type we have in the US) and even longer for economic power systems in general. Do you think these cost functions properly price disruptions? I'm saying this because the US is an order of magnitude less reliable than in Europe, and most of these costs are pushed onto consumers. E.g. When the power goes out and I have to throw away food or lose a day of work, PG&E has never compensated me for that. It's externalized. Now imagine a scenario where lots of people rely on the grid to charge their cars. I'm really skeptical of the obsessive hyper-optimization that's going on. If you have a situation where there is an extremely cheap energy provider that is highly unreliable, it could drive out of business the more expensive, reliable provider, and that needs to be taken into account. The zero or negative spot prices that were common in Texas as a result of windpower look to be an example of that pathology at work.

7thaccount 5y ago
They do have "scarcity pricing" which comes up when energy is either deficit or the required reserves are. ERCOT in particular has something like $9000/MWh.
- rsj_hn 5y ago
  So let's go with this number. A price is the result of optimizing some cost function, so let's see if the underlying cost function correctly measures the cost of a disruption. 9K/MWh would attribute 1 day of electricity as being worth $108 (assuming standard per-capita usage of 12kW). So for a single living alone, that's a bad deal, as suffering a power outage for 1 day and then being given $108 will not make them whole -- it wont even pay for the spoiled food, let alone the inconvenience of being without AC or internet for a day. For a household of 2.5, they would get $270, which would pay for the spoiled food and inconvenience of buying it and maybe get $30 left over for the inconvenience of no A.C., cell phone running out, not being able to use your computer or internet, do your laundry, perhaps not being able to use your mobile phone, etc. And we aren't even assuming PEV or people working from home. Then they would also lose 1 day of wages. So it would seem to me that just to make someone whole you should probably double or triple that, say to 20K/MWh, but then this is supposed to be a penalty rate, so it should cost more than what it would take to make a household whole, because we don't want the utility to be indifferent between making the household whole and providing the electricity, we want the utility to be heavily incentivized to avoid the disruption.
  - 7thaccount 5y ago
    These are wholesale prices, not retail, but yes the two are linked. $9000/MWh isn't crazy for a few intervals once a year, but if a generator clears 200 MW for each hour of the day for a day in the day ahead market and then has issues and can't provide that power in the real time market, it has to buy back that power at the spot price. That can get insanely expensive fast. Now imagine the owner of that generator has other generators in the same boat and it just stacks. These aren't trivial prices. Similarly, the load serving entities have to buy power at that spot price if they don't have it locked in at a lower price in the forward market (hard to do when events occur over multiple days). A little googling will turn up some chatter about many of those companies nearly defaulting from the ERCOT scarcity pricing during the February event.