3 ms·

Deregulation isn't about improving consumer outcomes, it's about improving profits. Expecting it to result in lower cost per kWh is a losing game.

deleted 5y ago
[deleted]
7thaccount 5y ago
If you read all the books covering the history of the deregulation of the regulated electric industry in the US, their reasoning was clear. Many years ago, under regulation (and still for those areas of the US that aren't in a market), it was the job of planners to determine the load growth and to build enough supply to meet demand and get a steady ROR. We did really bad at this in (I think it was the 80s), so there was a lot of pushback in making customers pay for generation they didn't need. At the same time, combined cycle plants made it possible to finally de-monopolize the generation side of things. The theory was the free market would be more innovative than the regulated utilities and less wasteful.
- Spooky23 5y ago
  A big part of that is the 70s/80s inflated destroyed capital budgets and reduced capital spend. Regulators always have a bias towards rate reduction. Once the deregulation movement set in, power generation became a fat hog ready to be exploited. In some cases, investors even got to use tax free municipal borrowing facilities.
- PaulHoule 5y ago
  "Made possible" also meant that coal burning plants were obsolete and we needed to restructure the generating system so they could go out of business without making the utilities go under. So much in the energy literature looks like a clock that stopped. For instance you still see cost estimates of advanced combustion systems from the 1970s that have been carried into the future without adjusting for inflation and changes in technology. People still compare nuclear power to coal but they quit building coal plants circa 1980 for the same reason they quit building nuclear plants -- the capital cost of the steam turbine is an order of magnitude more than a gas turbine, so even if you get the heat for free a current generation coal or nuclear plant is going to struggle to compete against the power plants we've been building since the 1980s.
  - philipkglass 5y ago
    People still compare nuclear power to coal but they quit building coal plants circa 1980 for the same reason they quit building nuclear plants You can see a graph of coal capacity added by year here: https://www.eia.gov/todayinenergy/detail.php?id=30812 https://www.eia.gov/todayinenergy/detail.php?id=30812 The US built coal plants in the 1990s and even in the 2010s. These last ones started construction in roughly the years 2003-2008, when US natural gas prices were elevated and (many thought) due to go up even more: https://www.macrotrends.net/2478/natural-gas-prices-historical-chart https://www.macrotrends.net/2478/natural-gas-prices-historic... Coal's brief renaissance was halted by a triple-whammy of lower gas costs (from shale), lower wind costs, and lower solar costs. It's soon to face another whammy: falling grid scale battery costs. I don't think that the continental US will ever build another coal generating station. But that happened more recently than 1980.
kurthr 5y ago
Exactly, it's about optimizing profits by lowering cost, and not lowering price. A "free" market doesn't mean a competitive or efficient market.
- 8note 5y ago
  And not by raising price* You already have all the customers you're going to get
  - kurthr 5y ago
    If you can't raise prices, you can't optimize profits!?! Hospitals, "have all the customers" they're going to get, but prices go up (faster than inflation) every year anyway. Note that insurance companies are often regulated on their cost percentages, but if their payouts keep going up... they're profits can too! Ultimately, that may even lower their number of customers to only those who are most profitable. Win-Win! I think it's kind of funny that some people think that "deregulated" markets are somehow magically efficient or competitive. Collusion and monopoly are inherently higher profit margin businesses and so incentivized by unregulated markets. Monopolies can be supply, transport, territorial, or temporal, but all optimize ROI. Note that regulatory capture is yet another method of stifling competition and creating monopoly pricing power.
missedthecue 5y ago
So the profits are greater and the costs are marginally cheaper?
roenxi 5y ago
What seems most remarkable to me is that we've got a fair amount of anti-free-market vitriol in the replies around here but nobody feels a need to provide any argument or evidence. The only person waving evidence around in this thread demonstrates that Texas has substantially lower electricity prices than the US average. And the article argues that there are edge cases where the market design could be improved. But I am well aware that the US has a range of regulatory strategies around power and I'm sure people have done detailed, exhaustive comparisons that are of high quality on the effects and outcomes of different regulatory approaches. Surely there are mountains of evidence that could be pointed to here. Is it to much to ask that the opinions are supported by evidence? Electricity outcomes aren't that complex. The important variables are price, reliability, safety and pollution if you like. Texas having a power crisis recently just isn't that big a deal for arguing about regulation vs deregulation on either side of the fence. Highly regulated systems also have crisises, regulators aren't perfect and nobody claims they are.
- deleted 5y ago
  [deleted]
- deleted 5y ago
  [deleted]
- fake-name 5y ago
  What seems most remarkable to me is that we've got a fair amount of pro-free-market vitriol in the replies around here but nobody feels a need to provide any argument or evidence. You need to provide evidence for the claims that the free market improves things, not the other way.
  - roenxi 5y ago
    Although I am certainly more than happy to make pro-free-market arguments (and have on occasion even in relation to the Texan power grid) I am stepping back from that for today. If the plan is to decide what is good and bad by innuendo that is a lousy plan and we can all probably agree on that point. This is the perfect opportunity to debate using facts and evidence rather than all sitting in a circle and observing that none of us have any. These whingers should leave some space for people who intend to be guided by facts.

deleted 5y ago

[deleted]

7thaccount 5y ago

If you read all the books covering the history of the deregulation of the regulated electric industry in the US, their reasoning was clear. Many years ago, under regulation (and still for those areas of the US that aren't in a market), it was the job of planners to determine the load growth and to build enough supply to meet demand and get a steady ROR. We did really bad at this in (I think it was the 80s), so there was a lot of pushback in making customers pay for generation they didn't need. At the same time, combined cycle plants made it possible to finally de-monopolize the generation side of things. The theory was the free market would be more innovative than the regulated utilities and less wasteful.

Spooky23 5y ago
A big part of that is the 70s/80s inflated destroyed capital budgets and reduced capital spend. Regulators always have a bias towards rate reduction. Once the deregulation movement set in, power generation became a fat hog ready to be exploited. In some cases, investors even got to use tax free municipal borrowing facilities.
PaulHoule 5y ago
"Made possible" also meant that coal burning plants were obsolete and we needed to restructure the generating system so they could go out of business without making the utilities go under. So much in the energy literature looks like a clock that stopped. For instance you still see cost estimates of advanced combustion systems from the 1970s that have been carried into the future without adjusting for inflation and changes in technology. People still compare nuclear power to coal but they quit building coal plants circa 1980 for the same reason they quit building nuclear plants -- the capital cost of the steam turbine is an order of magnitude more than a gas turbine, so even if you get the heat for free a current generation coal or nuclear plant is going to struggle to compete against the power plants we've been building since the 1980s.
- philipkglass 5y ago
  People still compare nuclear power to coal but they quit building coal plants circa 1980 for the same reason they quit building nuclear plants You can see a graph of coal capacity added by year here: https://www.eia.gov/todayinenergy/detail.php?id=30812 https://www.eia.gov/todayinenergy/detail.php?id=30812 The US built coal plants in the 1990s and even in the 2010s. These last ones started construction in roughly the years 2003-2008, when US natural gas prices were elevated and (many thought) due to go up even more: https://www.macrotrends.net/2478/natural-gas-prices-historical-chart https://www.macrotrends.net/2478/natural-gas-prices-historic... Coal's brief renaissance was halted by a triple-whammy of lower gas costs (from shale), lower wind costs, and lower solar costs. It's soon to face another whammy: falling grid scale battery costs. I don't think that the continental US will ever build another coal generating station. But that happened more recently than 1980.

kurthr 5y ago

Exactly, it's about optimizing profits by lowering cost, and not lowering price. A "free" market doesn't mean a competitive or efficient market.

8note 5y ago
And not by raising price* You already have all the customers you're going to get
- kurthr 5y ago
  If you can't raise prices, you can't optimize profits!?! Hospitals, "have all the customers" they're going to get, but prices go up (faster than inflation) every year anyway. Note that insurance companies are often regulated on their cost percentages, but if their payouts keep going up... they're profits can too! Ultimately, that may even lower their number of customers to only those who are most profitable. Win-Win! I think it's kind of funny that some people think that "deregulated" markets are somehow magically efficient or competitive. Collusion and monopoly are inherently higher profit margin businesses and so incentivized by unregulated markets. Monopolies can be supply, transport, territorial, or temporal, but all optimize ROI. Note that regulatory capture is yet another method of stifling competition and creating monopoly pricing power.

missedthecue 5y ago

So the profits are greater and the costs are marginally cheaper?

roenxi 5y ago

What seems most remarkable to me is that we've got a fair amount of anti-free-market vitriol in the replies around here but nobody feels a need to provide any argument or evidence. The only person waving evidence around in this thread demonstrates that Texas has substantially lower electricity prices than the US average. And the article argues that there are edge cases where the market design could be improved. But I am well aware that the US has a range of regulatory strategies around power and I'm sure people have done detailed, exhaustive comparisons that are of high quality on the effects and outcomes of different regulatory approaches. Surely there are mountains of evidence that could be pointed to here. Is it to much to ask that the opinions are supported by evidence? Electricity outcomes aren't that complex. The important variables are price, reliability, safety and pollution if you like. Texas having a power crisis recently just isn't that big a deal for arguing about regulation vs deregulation on either side of the fence. Highly regulated systems also have crisises, regulators aren't perfect and nobody claims they are.

deleted 5y ago
[deleted]
deleted 5y ago
[deleted]
fake-name 5y ago
What seems most remarkable to me is that we've got a fair amount of pro-free-market vitriol in the replies around here but nobody feels a need to provide any argument or evidence. You need to provide evidence for the claims that the free market improves things, not the other way.
- roenxi 5y ago
  Although I am certainly more than happy to make pro-free-market arguments (and have on occasion even in relation to the Texan power grid) I am stepping back from that for today. If the plan is to decide what is good and bad by innuendo that is a lousy plan and we can all probably agree on that point. This is the perfect opportunity to debate using facts and evidence rather than all sitting in a circle and observing that none of us have any. These whingers should leave some space for people who intend to be guided by facts.