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If you don’t raise prices, many people/companies will senselessly consume excess electricity they don’t need. Thus, you get power outages instead of merely high

If you don’t raise prices, many people/companies will senselessly consume excess electricity they don’t need. Thus, you get power outages instead of merely high prices. That being said, it’s not like most people have a real-time monitor of electricity prices so those that can will actually reduce consumption. Ultimately, in a constrained system, either you raise prices (and ensure availability, at expense) or fix prices and ensure scarcity for those unfortunate enough to suffer it (Ie. Rolling blackouts, no fuel at the gas station, etc)

NicoJuicy 5y ago
They obviously did both
- kerblang 5y ago
  I.E. They raised prices and "ensured" scarcity, yes.
- caf 5y ago
  That's exactly what the paper that the linked press release is about looks into. In an energy-only market, the intention is that the possibility of very high spot prices when energy supply is short is supposed to create an incentive to build expensive, robust plant that can meet the demand in such a situation. If you can stay online during the disaster, you can make a profit that makes up for having overspecced your plant for the remainder of the time. It can even make sense to have a quick-starting plant with a high short-run-marginal-cost that almost never runs at all - only starting up when supply is constrained or demand is very high, to take advantage of the high prices - a "peaker" plant. The paper is positing that this didn't work because the risks of investing in such a business plan were too high.
Johnny555 5y ago
That being said, it’s not like most people have a real-time monitor of electricity prices so those that can will actually reduce consumption. It's worse than that, this was an extreme weather condition (temps as low as -2F/-19C) in a state where 60% of homes are heated by electricity and many of those use inefficient electrical resistance heating. So even if residential users had real-time access to prices, they'd have to choose between paying any price or freezing. So it's not clear how elastic demand could be.
- dane-pgp 5y ago
  > inefficient electrical resistance heating. Inefficient in the sense that some of the electricity is turned into... waste heat?
  - Johnny555 5y ago
    In the sense that a good heat pump can be over 400% efficient but electrical resistance heat is 100% efficient. (ok, it's not scientifically correct to say that anything is over 100% efficient, and COP gets lower as the temperature decreases, but a good minisplit can still deliver a COP close to 2.0 down to 0 degrees F)
    - makomk 5y ago
      Arguably heat pumps would've made this worse, because although they decrease total power usage they increase the rate at which power usage goes up during cold spells, making the ratio of normal power usage to peak worst-case power usage even larger and harder for the grid to deal with. In systems that are well sized for the climate, this often means outright falling back to inefficient resisitive heating with all the resulting electricity demand from that.
reincarnate0x14 5y ago
This was absolutely not the problem during the 2021 winter storm. There was an absolute lack of power to be sold, at any price. Raising the spot MWH prices to 9 billion USD would have made no difference in what could be brought on-line, only how badly load serving entities were getting screwed. Empty office buildings all over the state that were lucky enough to be on critical circuits were beaming out lights the whole time because no one wanted to be the manager that got a building service worker killed trying to navigate icy roads to turn them off. Industrial sites were still running the whole time, with the Samsung fab near Austin still running for days after the near-blackout event until the power company disconnected them after days of asking. Distribution providers could not even rotate planned circuit disconnections because ERCOT would not let them turn anything back due to how narrow the spare capacity margin was. Meanwhile rural electric cooperatives that didn't own generation went bankrupt and every generator that could be was already up and running. Any load serving entity that didn't also own generation is now going to be amortizing the costs of that through rate increases for probably the next decade.
- gruez 5y ago
  >Raising the spot MWH prices to 9 billion USD would have made no difference in what could be brought on-line, only how badly load serving entities were getting screwed. Why not? If it's expensive enough you'll get people flying in spare generators from out-of-state to supply the demand.
  - reincarnate0x14 5y ago
    In the middle of a winter storm that has shut down nearly all transportation and frozen the well-heads for natural gas production? riiight. Unless the Navy happens to have a few nuclear vessels parked in the gulf ready to hook up, it is literally impossible to move hundreds of MW of generation in a week, much less the 20 GW that Texas needed at the time.
- Dylan16807 5y ago
  > There was an absolute lack of power to be sold, at any price. Raising the spot MWH prices to 9 billion USD would have made no difference in what could be brought on-line, only how badly load serving entities were getting screwed. Under the system Texas uses, it's the promise of those huge payments that encourages people to build excess peaker plants. If you remove them, and don't replace them with something better, then outages will become more common. The reason they exist isn't to hurt load serving entities. > amortizing the costs of that through rate increases for probably the next decade That's a good thing. That's the good outcome. The better alternative to giant peak fees, which is paying for capacity, has the same result: the base price is a little higher. The bad outcome is entities that can't just amortize over a decade or longer.
tzs 5y ago
There's not really much functional difference from my point of view between my heater and oven and fridge and lights not working because there is no electricity at my place due to a rolling blackout, and them not working because I had to turn them all off because the price has spiked so high I can't afford to use them.
- Dylan16807 5y ago
  If enough people are reacting to the spiking price, then it will peak at a much lower level, one where you'd feel okay running perhaps half of your things.

NicoJuicy 5y ago

They obviously did both

kerblang 5y ago
I.E. They raised prices and "ensured" scarcity, yes.
caf 5y ago
That's exactly what the paper that the linked press release is about looks into. In an energy-only market, the intention is that the possibility of very high spot prices when energy supply is short is supposed to create an incentive to build expensive, robust plant that can meet the demand in such a situation. If you can stay online during the disaster, you can make a profit that makes up for having overspecced your plant for the remainder of the time. It can even make sense to have a quick-starting plant with a high short-run-marginal-cost that almost never runs at all - only starting up when supply is constrained or demand is very high, to take advantage of the high prices - a "peaker" plant. The paper is positing that this didn't work because the risks of investing in such a business plan were too high.

Johnny555 5y ago

That being said, it’s not like most people have a real-time monitor of electricity prices so those that can will actually reduce consumption. It's worse than that, this was an extreme weather condition (temps as low as -2F/-19C) in a state where 60% of homes are heated by electricity and many of those use inefficient electrical resistance heating. So even if residential users had real-time access to prices, they'd have to choose between paying any price or freezing. So it's not clear how elastic demand could be.

dane-pgp 5y ago
> inefficient electrical resistance heating. Inefficient in the sense that some of the electricity is turned into... waste heat?
- Johnny555 5y ago
  In the sense that a good heat pump can be over 400% efficient but electrical resistance heat is 100% efficient. (ok, it's not scientifically correct to say that anything is over 100% efficient, and COP gets lower as the temperature decreases, but a good minisplit can still deliver a COP close to 2.0 down to 0 degrees F)
  - makomk 5y ago
    Arguably heat pumps would've made this worse, because although they decrease total power usage they increase the rate at which power usage goes up during cold spells, making the ratio of normal power usage to peak worst-case power usage even larger and harder for the grid to deal with. In systems that are well sized for the climate, this often means outright falling back to inefficient resisitive heating with all the resulting electricity demand from that.

reincarnate0x14 5y ago

This was absolutely not the problem during the 2021 winter storm. There was an absolute lack of power to be sold, at any price. Raising the spot MWH prices to 9 billion USD would have made no difference in what could be brought on-line, only how badly load serving entities were getting screwed. Empty office buildings all over the state that were lucky enough to be on critical circuits were beaming out lights the whole time because no one wanted to be the manager that got a building service worker killed trying to navigate icy roads to turn them off. Industrial sites were still running the whole time, with the Samsung fab near Austin still running for days after the near-blackout event until the power company disconnected them after days of asking. Distribution providers could not even rotate planned circuit disconnections because ERCOT would not let them turn anything back due to how narrow the spare capacity margin was. Meanwhile rural electric cooperatives that didn't own generation went bankrupt and every generator that could be was already up and running. Any load serving entity that didn't also own generation is now going to be amortizing the costs of that through rate increases for probably the next decade.

gruez 5y ago
>Raising the spot MWH prices to 9 billion USD would have made no difference in what could be brought on-line, only how badly load serving entities were getting screwed. Why not? If it's expensive enough you'll get people flying in spare generators from out-of-state to supply the demand.
- reincarnate0x14 5y ago
  In the middle of a winter storm that has shut down nearly all transportation and frozen the well-heads for natural gas production? riiight. Unless the Navy happens to have a few nuclear vessels parked in the gulf ready to hook up, it is literally impossible to move hundreds of MW of generation in a week, much less the 20 GW that Texas needed at the time.
Dylan16807 5y ago
> There was an absolute lack of power to be sold, at any price. Raising the spot MWH prices to 9 billion USD would have made no difference in what could be brought on-line, only how badly load serving entities were getting screwed. Under the system Texas uses, it's the promise of those huge payments that encourages people to build excess peaker plants. If you remove them, and don't replace them with something better, then outages will become more common. The reason they exist isn't to hurt load serving entities. > amortizing the costs of that through rate increases for probably the next decade That's a good thing. That's the good outcome. The better alternative to giant peak fees, which is paying for capacity, has the same result: the base price is a little higher. The bad outcome is entities that can't just amortize over a decade or longer.

tzs 5y ago

There's not really much functional difference from my point of view between my heater and oven and fridge and lights not working because there is no electricity at my place due to a rolling blackout, and them not working because I had to turn them all off because the price has spiked so high I can't afford to use them.

Dylan16807 5y ago
If enough people are reacting to the spiking price, then it will peak at a much lower level, one where you'd feel okay running perhaps half of your things.