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Why do we need the stupid market mechanisms at all? Government owned gas and electric monopolies, generation to the meter (heck, even extraction if the relevant

Why do we need the stupid market mechanisms at all? Government owned gas and electric monopolies, generation to the meter (heck, even extraction if the relevant reserves exist within the country), and a sizeable fuel fund to smooth out short term spikes. If the spikes are serious enough, you can run it at a loss for a while to keep people from freezing to death. All that and you get the benefit of oversight and democratic control of natural monopolies that deliver commodities that are necessary for day-to-day life in Europe. And nobody gets to make a profit from owning shares in the gas company. Sounds like a win-win.

lazide 4y ago
Good luck with that - it often quickly devolves into politicians using subsidies to curry votes and pointing fingers at the opposition for the inevitable brownouts and grid collapses. At least with a market folks will go bankrupt for suitably bad decisions, with gov’t nationalization, ‘the people’ end up getting both ends.
- AshamedCaptain 4y ago
  The market may allow a "folk" to go bankrupt, but will not allow companies to go bankrupt. Cue re-nationalization of EDF the moment things hint at becoming tight for EDF. I'm quite sure the EC will eventually "force" France to re-privatize EDF again, but only as soon as there's profits to be made...
  - lazide 4y ago
    That’s because these aren’t real markets, they’re barely disguised monopolies with captured regulators putting on a show. Which is basically gov’t run power, albeit with less accountability since you can’t figure out who to vote out. Pretty convenient for those running it though!
  - makomk 4y ago
    The reason things were becoming tight for EDF in the first place was mainly that the French government made them sell electricity at below-market prices for political reasons though.
    - cool_dude85 4y ago
      Interesting! I'm not familiar with how French electric and gas is set up, but in the US we don't really sell electricity or gas to the end user in a market, so there are no market prices. In what way was EDF made to sell below "market" electricity?
      - guerby 4y ago
        EDF electricity is 80% nuclear so fixed initial cost. When Europe pushed for opening the electricity market to private actors France reacted by forcing EDF to sell some amount of GWh of its nuclear electricity to third party at a price fixed by law, called "ARENH" (1). Now the french nuclear industry was put between a rock and a hard place. It has said for a long time that nuclear was ultra ultra cheap and unbeatable and ultra reliable so it could not really ask for a high price relative to historical prices. So we ended up with 42 EUR/MWh nuclear electricity price (which was the minimum price asked by EDF at the time) fixed by law for electricity provided by nuclear. Some years other sources were cheaper (most recent years BTW), some years nuclear was cheaper. Main issue this year is that french nuclear plants have potential safety issues plus various other issue and less than 50% capacity factor (bye bye nuclear = reliable baseload idea BTW) and other sources other than renewable have high price while EDF still has to provide amount of MWh at the now very low relative to market prices ARENH price to competitors. (1) https://fr.wikipedia.org/wiki/March%C3%A9_de_l%27%C3%A9lectricit%C3%A9_en_France https://fr.wikipedia.org/wiki/March%C3%A9_de_l%27%C3%A9lectr...
- cool_dude85 4y ago
  There are huge swathes of the US in more or less the situation I describe: federal, state, or local government owned, vertically integrated monopoly. Same as in Canada, and indeed much of Europe up until not so long ago. Where are all the grid collapses in these places? Meanwhile in California we had rolling brownouts after deregulation so that Enron could make bank. Seems like the situation is exactly the opposite as you describe.
  - lazide 4y ago
    See my reply down thread - there is an even worse third option, which is what you’re referring to!
    - cool_dude85 4y ago
      So your issue with California deregulation was that the generation market wasn't deregulated enough? Interesting idea I guess. Doesn't do much to support your claim of brownouts or grid collapse under publicly-owned monopolies though.
      - lazide 4y ago
        The California de-regulation enabled Enron while preventing everyone else from defending themselves from Enron. It simultaneously capped the price electricity could be sold at within the state, while requiring consuming utilities to pay spot price for electricity when they needed it. Enron took advantage of this to buy up all available generation capacity during specific (short) times, fraudulently export it, then resell it back to the state as non-domestic capacity (and hence not covered by the price caps) at insane markups to the consuming utilities when the time came. Because the regulator (CPUC) forbid utilities from taking out futures contracts, the utilities had no choice but to pay these insane markups, or go dark. While this was happening, the regulator also was tarpitting new electrical generation approvals. This crisis was only possible because the regulator literally: 1) turned a blind eye to reports that Enron was playing games until it threatened the Govenors position and had been causing massive brownouts and blackouts across the state. The Govenor did end up getting recalled, largely because of this crisis. 2) Set market prices through caps and quotas. 3) Mandated risky 'at the moment' purchases of capacity instead of what every other sane commodity market does, which is futures. 4) Blocked creation of new supply for a long period of time, while demand was increasing. And that was AFTER 'deregulation'. Which really just loosened the rules enough to make it hard to point the finger at anyone without a LOT of digging. To quote wikipedia [https://en.wikipedia.org/wiki/2000%E2%80%9301_California_electricity_crisis https://en.wikipedia.org/wiki/2000%E2%80%9301_California_ele...] "According to the Federal Energy Regulatory Commission (FERC), the crisis was possible because of legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson that deregulated some aspects of the energy industry. Enron took advantage of this partial deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.[9]" So yes, they basically lined up the states utilities and begged for them to be shot - and then when the utilities tried to do something to stop it, handcuffed them. Then acted surprised they got shot.
sokoloff 4y ago
There’s no natural monopoly on electricity generation. Distribution, yes, but not generation.
7952 4y ago
The CfD strike prices actually bring us closer to that. After the "stupid market mechanism" runs its course the operator is left with a fairly predictable budget. Which is exactly what you would want in a state run monopoly. By using the market we can set a budget based on competition and encourage cost reduction.

lazide 4y ago

Good luck with that - it often quickly devolves into politicians using subsidies to curry votes and pointing fingers at the opposition for the inevitable brownouts and grid collapses. At least with a market folks will go bankrupt for suitably bad decisions, with gov’t nationalization, ‘the people’ end up getting both ends.

AshamedCaptain 4y ago
The market may allow a "folk" to go bankrupt, but will not allow companies to go bankrupt. Cue re-nationalization of EDF the moment things hint at becoming tight for EDF. I'm quite sure the EC will eventually "force" France to re-privatize EDF again, but only as soon as there's profits to be made...
- lazide 4y ago
  That’s because these aren’t real markets, they’re barely disguised monopolies with captured regulators putting on a show. Which is basically gov’t run power, albeit with less accountability since you can’t figure out who to vote out. Pretty convenient for those running it though!
- makomk 4y ago
  The reason things were becoming tight for EDF in the first place was mainly that the French government made them sell electricity at below-market prices for political reasons though.
  - cool_dude85 4y ago
    Interesting! I'm not familiar with how French electric and gas is set up, but in the US we don't really sell electricity or gas to the end user in a market, so there are no market prices. In what way was EDF made to sell below "market" electricity?
    - guerby 4y ago
      EDF electricity is 80% nuclear so fixed initial cost. When Europe pushed for opening the electricity market to private actors France reacted by forcing EDF to sell some amount of GWh of its nuclear electricity to third party at a price fixed by law, called "ARENH" (1). Now the french nuclear industry was put between a rock and a hard place. It has said for a long time that nuclear was ultra ultra cheap and unbeatable and ultra reliable so it could not really ask for a high price relative to historical prices. So we ended up with 42 EUR/MWh nuclear electricity price (which was the minimum price asked by EDF at the time) fixed by law for electricity provided by nuclear. Some years other sources were cheaper (most recent years BTW), some years nuclear was cheaper. Main issue this year is that french nuclear plants have potential safety issues plus various other issue and less than 50% capacity factor (bye bye nuclear = reliable baseload idea BTW) and other sources other than renewable have high price while EDF still has to provide amount of MWh at the now very low relative to market prices ARENH price to competitors. (1) https://fr.wikipedia.org/wiki/March%C3%A9_de_l%27%C3%A9lectricit%C3%A9_en_France https://fr.wikipedia.org/wiki/March%C3%A9_de_l%27%C3%A9lectr...
cool_dude85 4y ago
There are huge swathes of the US in more or less the situation I describe: federal, state, or local government owned, vertically integrated monopoly. Same as in Canada, and indeed much of Europe up until not so long ago. Where are all the grid collapses in these places? Meanwhile in California we had rolling brownouts after deregulation so that Enron could make bank. Seems like the situation is exactly the opposite as you describe.
- lazide 4y ago
  See my reply down thread - there is an even worse third option, which is what you’re referring to!
  - cool_dude85 4y ago
    So your issue with California deregulation was that the generation market wasn't deregulated enough? Interesting idea I guess. Doesn't do much to support your claim of brownouts or grid collapse under publicly-owned monopolies though.
    - lazide 4y ago
      The California de-regulation enabled Enron while preventing everyone else from defending themselves from Enron. It simultaneously capped the price electricity could be sold at within the state, while requiring consuming utilities to pay spot price for electricity when they needed it. Enron took advantage of this to buy up all available generation capacity during specific (short) times, fraudulently export it, then resell it back to the state as non-domestic capacity (and hence not covered by the price caps) at insane markups to the consuming utilities when the time came. Because the regulator (CPUC) forbid utilities from taking out futures contracts, the utilities had no choice but to pay these insane markups, or go dark. While this was happening, the regulator also was tarpitting new electrical generation approvals. This crisis was only possible because the regulator literally: 1) turned a blind eye to reports that Enron was playing games until it threatened the Govenors position and had been causing massive brownouts and blackouts across the state. The Govenor did end up getting recalled, largely because of this crisis. 2) Set market prices through caps and quotas. 3) Mandated risky 'at the moment' purchases of capacity instead of what every other sane commodity market does, which is futures. 4) Blocked creation of new supply for a long period of time, while demand was increasing. And that was AFTER 'deregulation'. Which really just loosened the rules enough to make it hard to point the finger at anyone without a LOT of digging. To quote wikipedia [https://en.wikipedia.org/wiki/2000%E2%80%9301_California_electricity_crisis https://en.wikipedia.org/wiki/2000%E2%80%9301_California_ele...] "According to the Federal Energy Regulatory Commission (FERC), the crisis was possible because of legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson that deregulated some aspects of the energy industry. Enron took advantage of this partial deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.[9]" So yes, they basically lined up the states utilities and begged for them to be shot - and then when the utilities tried to do something to stop it, handcuffed them. Then acted surprised they got shot.

sokoloff 4y ago

There’s no natural monopoly on electricity generation. Distribution, yes, but not generation.

7952 4y ago

The CfD strike prices actually bring us closer to that. After the "stupid market mechanism" runs its course the operator is left with a fairly predictable budget. Which is exactly what you would want in a state run monopoly. By using the market we can set a budget based on competition and encourage cost reduction.