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Pricing at marginal cost is the biggest steal in economics. Just because one folk who contributes 0.1% to the energy mix has double the average cost, everyone

Pricing at marginal cost is the biggest steal in economics. Just because one folk who contributes 0.1% to the energy mix has double the average cost, everyone gets to sneak in and get free money. Specially true in the last winter in Texas where we paid billions to the big power generators only to freeze to death. The best trick that I have seen happening in the industry is suffocating supply so that the new marginal player just comes in, and then you collect all the extra free money, for essentially selling the same volume. Good times.

caminante 5y ago
For that, I don't blame the generation market as much as I fault legislators for horrible delays in decisions. The market cleared at the $9k/MWh cap for an excessive amount of time. E: and it was avoidable!
- whatever1 5y ago
  There was huge backlash even when this super high cap was passed. The initial idea was that the market will regulate itself, thus no cap is needed. The small detail they let out of the equation is that the taxpayers will have to bail out the market if it does not regulate itself. And boy did we pay for nice ceo bonuses that spring.
  - caminante 5y ago
    I forgot about this hilarious event where a regulator made the mistake of telling utilities they'd get bailed out. https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#PUC_controversy https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#PUC_...
nsomani 5y ago
Yeah I think the theoretical argument is that the uniform clearing price is supposed to incentivize producers to bid at their marginal cost
- whatever1 5y ago
  Which is a great idea if we had a thousand small producers of roughly equal capacity. It’s a horrible idea (for the consumers) when you have 3 huge players and then some tiny participants.
jimmyvalmer 5y ago
- whatever1 5y ago
  Allow me to help you. It’s called profiteering. But in this case we made it legal.
  - jimmyvalmer 5y ago

caminante 5y ago

For that, I don't blame the generation market as much as I fault legislators for horrible delays in decisions. The market cleared at the $9k/MWh cap for an excessive amount of time. E: and it was avoidable!

whatever1 5y ago
There was huge backlash even when this super high cap was passed. The initial idea was that the market will regulate itself, thus no cap is needed. The small detail they let out of the equation is that the taxpayers will have to bail out the market if it does not regulate itself. And boy did we pay for nice ceo bonuses that spring.
- caminante 5y ago
  I forgot about this hilarious event where a regulator made the mistake of telling utilities they'd get bailed out. https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#PUC_controversy https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#PUC_...

nsomani 5y ago

Yeah I think the theoretical argument is that the uniform clearing price is supposed to incentivize producers to bid at their marginal cost

whatever1 5y ago
Which is a great idea if we had a thousand small producers of roughly equal capacity. It’s a horrible idea (for the consumers) when you have 3 huge players and then some tiny participants.

jimmyvalmer 5y ago

whatever1 5y ago
Allow me to help you. It’s called profiteering. But in this case we made it legal.
- jimmyvalmer 5y ago