10 ms·

This is classic “efficiency” vs “antifragility.” There are some things that are okay to ocassionally fail, and for those it’s often good to pursue efficiency. B

This is classic “efficiency” vs “antifragility.” There are some things that are okay to ocassionally fail, and for those it’s often good to pursue efficiency. But for something critical like electricity, the market all decided - with good financial justification - that it would be more profitable to just let the system fail occasionally than to be hardened against long-tail events. In systems engineering if we want this to not happen we usually intentionally add volatility, things like putting chaos monkey into your infra so that long-tail failures become common and thus the necessary hardening can’t be missed. I’m not quite sure what this would look like for an electricity market. Maybe something like huge fines for having your capacity go off-line, which require insurance, and the insurers thus require winterization or they charge way higher rates which make your plant uneconomical. Or a regulation that says all plants must be winterized to a certain degree thus the cost of electricity will just be higher for everyone to pay for mitigation of long tail risk. The fines approach is more indirect but - assuming it works - it leaves room for edge cases and innovation that the “orderly but dumb” regulation does not.

JaimeThompson 5y ago
>Or a regulation that says all plants must be winterized to a certain degree thus the cost of electricity will just be higher for everyone to pay for mitigation of long tail risk The Southwest Power Pool has such regulations which is why they didn't have the same level of issues in the parts of Texas they serve.
- mhb 5y ago
  But they would have similar issues in some more extreme situation. Why is it obvious that the big storm that SPP has anticipated and expended resources on is the right one? Or will there be a report like this when that storm arrives and SPP also has issues?
  - ocschwar 5y ago
    Not SPP. FERC. Winterization is required for any gear that's on an AC grid that crosses state lines. SPP is on the Eastern Interconnection. So all the players in SPP are required to winterize. ERCOT is entirely inside Texas, so they had a choice. And they chose.... poorly.
  - JaimeThompson 5y ago
    The SPP has taken steps to mitigate such risks. See their coverage area and other detail here https://spp.org/ https://spp.org/
    - 7thaccount 5y ago
      There is a winter weather event report that covers what happened in granular detail and lists all the initiatives in progress to lower the chances of something similar happening again.
JumpCrisscross 5y ago
Or just be transparent about that trade-off. It's a fair one to make. Putting batteries at mission-critical sites may be the better play than winterizing the entire grid, from hospitals to merry-go-rounds.
- SamoyedFurFluff 5y ago
  But this leaves for potentially unethical situations like vulnerable populations who cannot afford batteries or winterized electricity. Im thinking someone disabled living on disability probably can’t afford premium electricity bills even if they need to maintain their lifesaving and expensive equipment yknow?
  - anonporridge 5y ago
    There's still a dark balancing act going on. We don't have the collective power to save everyone, and if we overextend ourselves trying to do that, then there is a risk that the whole system collapses for everyone, or partially collapses and causes more pain than might have happened without spreading ourselves too thin. We obviously need to struggle to make a good world for everyone, but nature is fucking brutal and it doesn't care about our sense of ethics.
    - PaulHoule 5y ago
      Back before electricity deregulation we were paying more for electricity but in the process of rate setting we were looking at it from a systems perspective in which reliability was considered holistically. (The lower rates were not just from ‘efficient markets’ but also it being possible for high cost producers such as steam turbine coal fired power plants to go bankrupt in the fracked gas age w/o bankrupting the whole utility.)
    - cortesoft 5y ago
      > We don't have the collective power to save everyon Except we do? We have plenty of resources if they were distributed more evenly. In this particular example, other states are able to provide energy during rare events because they did not choose to go with a pure market based system. They aren’t on the verge of collapse.
bryanlarsen 5y ago
As I understand it, (ie, poorly), California pays for both power and capacity. Capacity payments are paid whether the plant is used or not, and capacity has fairly strict uptime requirements or it doesn't pay for that capacity.
- toomuchtodo 5y ago
  Correct. Most grids work this way. ERCOT does not. https://www.sciencedirect.com/topics/engineering/capacity-payment https://www.sciencedirect.com/topics/engineering/capacity-pa... https://www.reuters.com/article/us-usa-weather-power-prices-explainer-idUSKBN2AG2KD https://www.reuters.com/article/us-usa-weather-power-prices-...
- cool_dude85 5y ago
  I havent studied this in depth, but my intuition tells me that having capacity payments such that the grid as a whole has sufficient overhead for extreme events nullifies any "efficiency" arguments for having these market mechanisms in the first place. Call me crazy, I think that Texas is doing exactly what it set out to do with deregulation. Run the grid more efficiently via market mechanisms. The method that is used to make the grid more efficient is simply to shave off the traditional 20% capacity overhead meant to cover these sorts of situations. There you go, slightly cheaper electricity 99% of the time.
  - selectodude 5y ago
    And then the long-tail events completely wipe out decades of savings. Griddy was charging over $9/kwh last year.
    - abathur 5y ago
      It's worth clarifying that Griddy wasn't "charging" these rates in an effort to gouge, nor was this rate an active decision they made during the crisis. (You likely know this; just providing context for casual readers.) Griddy charged a fixed monthly subscriber fee, and then passed through delivery charges, taxes/fees, and the 5-minute wholesale electric rate (IIUC, as set by the ercot market). These all came out of pre-paid customer deposits, generally backed by auto-pay when the account was below some amount. Griddy "charged" $9/kWh intermittently while demand was outstripping supply but the system was largely stable. This model was approved by the (de-)regulators. After the large-scale blackouts, the public utility commission pegged the rate to the regulatory cap in the market for a few days. This was ostensibly to ensure maximum incentive to bring all possible generation back online (though plausible, I personally suspect this ended up just being a reward to large operators who owned both plants that were part of the problem, and plants still online to rake in market-cap rates for several days.) Any retail power companies whose pockets weren't deep enough to stay solvent while paying ~200x normal wholesale rates for several days went under. In Griddy's case, bankruptcy was a step removed; these rates were passed through to customers via autopay until the transactions stopped clearing, either because the account was empty, or the customer removed the payment method. IIRC none of the providers were legally allowed to cut customers off during the emergency, so these turned into massive bills (though I think Griddy clarified pretty quickly that they wouldn't be pursuing anyone for these). Since Griddy was a pre-pay service, I doubt they had enough of a buffer to absorb these whole-sale costs without payment for long.
spamizbad 5y ago
What I don’t understand about the Texas electricity market is that, despite how “free” it is, price per kwh isn’t terribly competitive compared to more tightly regulated states - having the highest average residential rates in the West South Central region: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...
- vel0city 5y ago
  This average price is a bit complicated to look at, and requires even more understanding of the Texas market. There are essentially two types of electric customers in ERCOT areas in Texas: those in co-ops and those in open markets where you can choose your Retail Electric Provider and plan. Your physical location determines which kind of market you fall into. In a co-op, those residents do not get to choose their power plan. Their rates are decided by the co-op, you either have electricity at that rate or you don't. The open market allows for people to choose from many different Retail Electric Providers offering all kinds of plans. Free nights and weekends, but your rate during weekdays is sky high. Discounts below certain usage, with surcharges going over. Discounts once you use a certain amount, with surcharges if you use too little. Different rate prices for different usage amounts. 100% renewable. 0% renewable. 15% renewable. Flat monthly rate. All kinds of various contracts you can sign up for. In that open market, I can choose plans way cheaper than that average rate. I can sign up for a plan with 100% renewable energy with an average rate of 9.8c/kWh for 2,000kWh. https://octopusenergy.com/documents/efls/OCTOPLUS-24M-ONCOR-EN.pdf https://octopusenergy.com/documents/efls/OCTOPLUS-24M-ONCOR-... However, lots of people even in the open market just go with whatever plans they hear on the radio or TV. Any REP with a budget to have TV commercials is going to be one of the more expensive ones. Rhythm - 11.3c/kWh @ 2,000kWh, 100% renewable https://api.gotrhythm.com/api/pricing/offers/latest-offers-efl/676/?locale=en https://api.gotrhythm.com/api/pricing/offers/latest-offers-e... TXU Energy - tons of TV ads - 12.5c/kWh https://www.txu.com/Handlers/PDFGenerator.ashx?comProdId=ONXSIMVL3636AD&lang=en&formType=EnergyFactsLabel&custClass=3&tdsp=ONCOR https://www.txu.com/Handlers/PDFGenerator.ashx?comProdId=ONX... So yeah, some people just buy what they see on TV and pay through the nose. Some aren't really a part of this open market and get whatever their co-op wants to bill them. However, it can be much cheaper to shop online. I'm still on a 36mo contract for <9c/kWh, putting me cheaper than the average of every state. http://powertochoose.org/ http://powertochoose.org/ If you notice in that EIA table, Texas has one of the lowest average commercial and industrial rates in the country. Commercial and industrial customers actually bother looking around at rates and aren't necessarily swayed by the slick looking guy on TV saying "free nights and weekends, 25c/kWh at noon!"
reincarnate0x14 5y ago
Most of the market models have some means of pricing out spinning reserves or nearline capacity and other ancillary services that aren't necessarily spinning a meter. Unfortunately trying to determine the correct price incentives is complicated and it often only becomes apparent a serious mistake was made after an event. One element of this is that overall US power grid and associated infrastructure was hugely over-engineered from like 1940-1980 and some areas are only recently pushing the limits of 1960s era transmission and generation planning, in many cases because old nasty coal plants are closing and non-dispatchable renewables are cropping up at locations power plants wouldn't have made sense historically. Other market operators in north America have different means of doing it. PJM's capacity market strategy ( https://pjm.com/markets-and-operations/rpm.aspx https://pjm.com/markets-and-operations/rpm.aspx ) has been a reasonably successful, at least so far. CAISO has their resource adequacy planning but the changes in the western interconnect have been seriously straining both the market model and the reliability coordination in parts of California. Can't dig up a good link right now but there has been some discussion that one problem with ERCOT's forecasting was that it assumed demand stopped increasing once it reached a cold-weather ceiling, which may or may not have contributed to lack of early action in the 2021 storm. But they also have no good means of early opportunistic demand reduction, which might have trimmed several GW off peak demand during the storm as many empty buildings and industrial users were still up and running with no one able to safely go to the facilities and safely shut down unimportant loads. I remain personally of the opinion that if it takes increasingly complicated rules and financial structures to get the desired results, that maybe the modern US concept of a deregulated power market isn't such a great idea to begin with, but it's not going away any time soon.
somethoughts 5y ago
It'd be interesting what the effect might be if one day of the week only non-renewables are allowed on the market and the renewable energy is required to be used/transferred elsewhere or is only paid a marginal rate.
ocschwar 5y ago
A few years ago there was an incident in California where someone emptied an AK-47 into a transformer, nearly, but not quite, causing a local blackout. And I have to wonder if it was a chaos monkey from one of our security agencies forcing the issue.
deleted 5y ago
[deleted]
aaron695 5y ago
MomoXenosaga 5y ago
Texas Republicans all decided - with good financial justification - that it would be more profitable to just let the system fail occasionally than to be hardened against long-tail events. Fixed that for you. The Federal government will bail Texas out. Always has always will.

JaimeThompson 5y ago

>Or a regulation that says all plants must be winterized to a certain degree thus the cost of electricity will just be higher for everyone to pay for mitigation of long tail risk The Southwest Power Pool has such regulations which is why they didn't have the same level of issues in the parts of Texas they serve.

mhb 5y ago
But they would have similar issues in some more extreme situation. Why is it obvious that the big storm that SPP has anticipated and expended resources on is the right one? Or will there be a report like this when that storm arrives and SPP also has issues?
- ocschwar 5y ago
  Not SPP. FERC. Winterization is required for any gear that's on an AC grid that crosses state lines. SPP is on the Eastern Interconnection. So all the players in SPP are required to winterize. ERCOT is entirely inside Texas, so they had a choice. And they chose.... poorly.
- JaimeThompson 5y ago
  The SPP has taken steps to mitigate such risks. See their coverage area and other detail here https://spp.org/ https://spp.org/
  - 7thaccount 5y ago
    There is a winter weather event report that covers what happened in granular detail and lists all the initiatives in progress to lower the chances of something similar happening again.

JumpCrisscross 5y ago

Or just be transparent about that trade-off. It's a fair one to make. Putting batteries at mission-critical sites may be the better play than winterizing the entire grid, from hospitals to merry-go-rounds.

SamoyedFurFluff 5y ago
But this leaves for potentially unethical situations like vulnerable populations who cannot afford batteries or winterized electricity. Im thinking someone disabled living on disability probably can’t afford premium electricity bills even if they need to maintain their lifesaving and expensive equipment yknow?
- anonporridge 5y ago
  There's still a dark balancing act going on. We don't have the collective power to save everyone, and if we overextend ourselves trying to do that, then there is a risk that the whole system collapses for everyone, or partially collapses and causes more pain than might have happened without spreading ourselves too thin. We obviously need to struggle to make a good world for everyone, but nature is fucking brutal and it doesn't care about our sense of ethics.
  - PaulHoule 5y ago
    Back before electricity deregulation we were paying more for electricity but in the process of rate setting we were looking at it from a systems perspective in which reliability was considered holistically. (The lower rates were not just from ‘efficient markets’ but also it being possible for high cost producers such as steam turbine coal fired power plants to go bankrupt in the fracked gas age w/o bankrupting the whole utility.)
  - cortesoft 5y ago
    > We don't have the collective power to save everyon Except we do? We have plenty of resources if they were distributed more evenly. In this particular example, other states are able to provide energy during rare events because they did not choose to go with a pure market based system. They aren’t on the verge of collapse.

bryanlarsen 5y ago

As I understand it, (ie, poorly), California pays for both power and capacity. Capacity payments are paid whether the plant is used or not, and capacity has fairly strict uptime requirements or it doesn't pay for that capacity.

toomuchtodo 5y ago
Correct. Most grids work this way. ERCOT does not. https://www.sciencedirect.com/topics/engineering/capacity-payment https://www.sciencedirect.com/topics/engineering/capacity-pa... https://www.reuters.com/article/us-usa-weather-power-prices-explainer-idUSKBN2AG2KD https://www.reuters.com/article/us-usa-weather-power-prices-...
cool_dude85 5y ago
I havent studied this in depth, but my intuition tells me that having capacity payments such that the grid as a whole has sufficient overhead for extreme events nullifies any "efficiency" arguments for having these market mechanisms in the first place. Call me crazy, I think that Texas is doing exactly what it set out to do with deregulation. Run the grid more efficiently via market mechanisms. The method that is used to make the grid more efficient is simply to shave off the traditional 20% capacity overhead meant to cover these sorts of situations. There you go, slightly cheaper electricity 99% of the time.
- selectodude 5y ago
  And then the long-tail events completely wipe out decades of savings. Griddy was charging over $9/kwh last year.
  - abathur 5y ago
    It's worth clarifying that Griddy wasn't "charging" these rates in an effort to gouge, nor was this rate an active decision they made during the crisis. (You likely know this; just providing context for casual readers.) Griddy charged a fixed monthly subscriber fee, and then passed through delivery charges, taxes/fees, and the 5-minute wholesale electric rate (IIUC, as set by the ercot market). These all came out of pre-paid customer deposits, generally backed by auto-pay when the account was below some amount. Griddy "charged" $9/kWh intermittently while demand was outstripping supply but the system was largely stable. This model was approved by the (de-)regulators. After the large-scale blackouts, the public utility commission pegged the rate to the regulatory cap in the market for a few days. This was ostensibly to ensure maximum incentive to bring all possible generation back online (though plausible, I personally suspect this ended up just being a reward to large operators who owned both plants that were part of the problem, and plants still online to rake in market-cap rates for several days.) Any retail power companies whose pockets weren't deep enough to stay solvent while paying ~200x normal wholesale rates for several days went under. In Griddy's case, bankruptcy was a step removed; these rates were passed through to customers via autopay until the transactions stopped clearing, either because the account was empty, or the customer removed the payment method. IIRC none of the providers were legally allowed to cut customers off during the emergency, so these turned into massive bills (though I think Griddy clarified pretty quickly that they wouldn't be pursuing anyone for these). Since Griddy was a pre-pay service, I doubt they had enough of a buffer to absorb these whole-sale costs without payment for long.

spamizbad 5y ago

What I don’t understand about the Texas electricity market is that, despite how “free” it is, price per kwh isn’t terribly competitive compared to more tightly regulated states - having the highest average residential rates in the West South Central region: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

vel0city 5y ago
This average price is a bit complicated to look at, and requires even more understanding of the Texas market. There are essentially two types of electric customers in ERCOT areas in Texas: those in co-ops and those in open markets where you can choose your Retail Electric Provider and plan. Your physical location determines which kind of market you fall into. In a co-op, those residents do not get to choose their power plan. Their rates are decided by the co-op, you either have electricity at that rate or you don't. The open market allows for people to choose from many different Retail Electric Providers offering all kinds of plans. Free nights and weekends, but your rate during weekdays is sky high. Discounts below certain usage, with surcharges going over. Discounts once you use a certain amount, with surcharges if you use too little. Different rate prices for different usage amounts. 100% renewable. 0% renewable. 15% renewable. Flat monthly rate. All kinds of various contracts you can sign up for. In that open market, I can choose plans way cheaper than that average rate. I can sign up for a plan with 100% renewable energy with an average rate of 9.8c/kWh for 2,000kWh. https://octopusenergy.com/documents/efls/OCTOPLUS-24M-ONCOR-EN.pdf https://octopusenergy.com/documents/efls/OCTOPLUS-24M-ONCOR-... However, lots of people even in the open market just go with whatever plans they hear on the radio or TV. Any REP with a budget to have TV commercials is going to be one of the more expensive ones. Rhythm - 11.3c/kWh @ 2,000kWh, 100% renewable https://api.gotrhythm.com/api/pricing/offers/latest-offers-efl/676/?locale=en https://api.gotrhythm.com/api/pricing/offers/latest-offers-e... TXU Energy - tons of TV ads - 12.5c/kWh https://www.txu.com/Handlers/PDFGenerator.ashx?comProdId=ONXSIMVL3636AD&lang=en&formType=EnergyFactsLabel&custClass=3&tdsp=ONCOR https://www.txu.com/Handlers/PDFGenerator.ashx?comProdId=ONX... So yeah, some people just buy what they see on TV and pay through the nose. Some aren't really a part of this open market and get whatever their co-op wants to bill them. However, it can be much cheaper to shop online. I'm still on a 36mo contract for <9c/kWh, putting me cheaper than the average of every state. http://powertochoose.org/ http://powertochoose.org/ If you notice in that EIA table, Texas has one of the lowest average commercial and industrial rates in the country. Commercial and industrial customers actually bother looking around at rates and aren't necessarily swayed by the slick looking guy on TV saying "free nights and weekends, 25c/kWh at noon!"

reincarnate0x14 5y ago

Most of the market models have some means of pricing out spinning reserves or nearline capacity and other ancillary services that aren't necessarily spinning a meter. Unfortunately trying to determine the correct price incentives is complicated and it often only becomes apparent a serious mistake was made after an event. One element of this is that overall US power grid and associated infrastructure was hugely over-engineered from like 1940-1980 and some areas are only recently pushing the limits of 1960s era transmission and generation planning, in many cases because old nasty coal plants are closing and non-dispatchable renewables are cropping up at locations power plants wouldn't have made sense historically. Other market operators in north America have different means of doing it. PJM's capacity market strategy ( https://pjm.com/markets-and-operations/rpm.aspx https://pjm.com/markets-and-operations/rpm.aspx ) has been a reasonably successful, at least so far. CAISO has their resource adequacy planning but the changes in the western interconnect have been seriously straining both the market model and the reliability coordination in parts of California. Can't dig up a good link right now but there has been some discussion that one problem with ERCOT's forecasting was that it assumed demand stopped increasing once it reached a cold-weather ceiling, which may or may not have contributed to lack of early action in the 2021 storm. But they also have no good means of early opportunistic demand reduction, which might have trimmed several GW off peak demand during the storm as many empty buildings and industrial users were still up and running with no one able to safely go to the facilities and safely shut down unimportant loads. I remain personally of the opinion that if it takes increasingly complicated rules and financial structures to get the desired results, that maybe the modern US concept of a deregulated power market isn't such a great idea to begin with, but it's not going away any time soon.

somethoughts 5y ago

It'd be interesting what the effect might be if one day of the week only non-renewables are allowed on the market and the renewable energy is required to be used/transferred elsewhere or is only paid a marginal rate.

ocschwar 5y ago

A few years ago there was an incident in California where someone emptied an AK-47 into a transformer, nearly, but not quite, causing a local blackout. And I have to wonder if it was a chaos monkey from one of our security agencies forcing the issue.

deleted 5y ago

[deleted]

aaron695 5y ago

MomoXenosaga 5y ago

Texas Republicans all decided - with good financial justification - that it would be more profitable to just let the system fail occasionally than to be hardened against long-tail events. Fixed that for you. The Federal government will bail Texas out. Always has always will.