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>> It'd be much more sensible to deregulate and let the people who profit build the interconnects. Firstly, it's worth saying that in markets with high barrier

>> It'd be much more sensible to deregulate and let the people who profit build the interconnects. Firstly, it's worth saying that in markets with high barrier-to-entry costs, it's not easy for the "market" to protect against profiteering. Or put another way, if the local utility decides to charge more, its not like you can just build a power station, and connect to the grid, to undercut and take a profit. Equally, given the cost of starting up, concessions are made to protect monopolies (or semi monopolies) to avoid unnecessary duplication of infrastructure. Regulations though can be good, or bad, depending on your point of view. They either work for the business (keeping out competition) or for the consumer (preventing price gouging.) And it's not just today's profits that matter but tomorrow's as well. If I'm allowed to charge more during periods of high demand, that encourages me to increase scarcity. I'm incentived to provide less power, and get more profit. So deregulation likely ends badly for the consumer. It likely leads to scarcity since that improves profits. On the other hand deregulation has allowed me to have residential solar, dropping my energy bill by 80%. And high prices make that financially attractive. So some deregulation good? My point is that the balance between regulator, provider and consumer is a very fine one, and messing with that balance can have consequences.

roenxi 3y ago
> its not like you can just build a power station, and connect to the grid, to undercut and take a profit. Technically it is pretty easy. Buy some solar panels or a diesel generator. Grid access is a harder but as far as I've seen the limiting factor is going to be government policy. You won't be cost competitive with state of the art .... but that implies that the grid prices are fair so you won't be able to drive prices down with any amount of capital. People don't build new plants often, but that is because high prices are going to be caused by (1) that is the best anyone can do or (2) the government is enforcing regulation that makes competition impossible and in rare cases (3) someone else is already building new power plants faster and better than they can, so it is a waste of effort. If none of those 3 conditions are present, things happen at the speed of capitalism (ie, faster than people think). > If I'm allowed to charge more during periods of high demand, that encourages me to increase scarcity. I'm incentived to provide less power, and get more profit. This logic is just not describing what happens in practice. If the government is giving someone monopoly power then yes, but under normal conditions someone trying to execute this strategy just goes bankrupt because competitors will undercut them in high demand periods and supply power in normal periods.
- nobody9999 3y ago
  >This logic is just not describing what happens in practice. If the government is giving someone monopoly power then yes, but under normal conditions someone trying to execute this strategy just goes bankrupt because competitors will undercut them in high demand periods and supply power in normal periods. That doesn't track with my experience (Northeastern US). While I can choose from multiple companies to provide me with electricity (using the extant infrastructure as mandated by the public utilities regulator), the owner of that infrastructure (in my case Consolidated Edison) charges more for delivering that electricity than the cost of the electricity itself. As such, it doesn't really matter who is providing my electricity -- I end up paying more for the "delivery infrastructure" regardless of my $/kwh costs.
- irjustin 3y ago
  > This logic is just not describing what happens in practice It is though just not in a way that's obvious. It's not free reign capitalism, there's government oversight to prevent the obvious price gouging. The issue is when that 20 year mark hits and no one was ready but the automated systems were allowed to charge uncapped, 180x normal rate[0]. The power company cut corners where it could, on winterization because "what are the chances of that happening"? Were low, but not zero. They had happened before in Texas's history but they just chose not to because it's relatively expensive to protect against 50 yr time horizons. [0] https://en.wikipedia.org/wiki/2021_Texas_power_crisis https://en.wikipedia.org/wiki/2021_Texas_power_crisis
  - roenxi 3y ago
    > The issue is when that 20 year mark hits and no one was ready but the automated systems were allowed to charge uncapped, 180x normal rate[0]. That is actually relatively normal behaviour for an electricity market. In my area the price usually jumps 2 orders of magnitude at the height of summer. It isn't a concern (the grid is cooked, but not because of peak prices). The market is signalling that it is worth having capacity available just for the peak - the cost of that type of redundancy is high, so the prices need to be high to make it happen. Also, if the price is capped then the grid blacks out at that point. Uncapped is the way to go.
ethbr1 3y ago
Deregulation in high-capital, long-lead-time, must-serve markets like energy, telecom, and emergency medicine has generally ended badly. Because eventually someone realizes profit can be maximized by (minimizing investment) + (maximizing risk) + (increasing prices) + (appealing for government bailouts whenever catastrophe strikes). A utility commission that looks skeptically at rate increases, but in return provides a more stable rate that industry can use to plan long-term expansions against, works better. Yes, you have to deal with regulatory capture and ambivalence towards increasing efficiency and modernizing business -- but those are still solvable problems in a regulated environment.
- mcbishop 3y ago
  > has generally ended badly For a good example, watch the documentary: Enron: The Smartest Guys in the Room

roenxi 3y ago

> its not like you can just build a power station, and connect to the grid, to undercut and take a profit. Technically it is pretty easy. Buy some solar panels or a diesel generator. Grid access is a harder but as far as I've seen the limiting factor is going to be government policy. You won't be cost competitive with state of the art .... but that implies that the grid prices are fair so you won't be able to drive prices down with any amount of capital. People don't build new plants often, but that is because high prices are going to be caused by (1) that is the best anyone can do or (2) the government is enforcing regulation that makes competition impossible and in rare cases (3) someone else is already building new power plants faster and better than they can, so it is a waste of effort. If none of those 3 conditions are present, things happen at the speed of capitalism (ie, faster than people think). > If I'm allowed to charge more during periods of high demand, that encourages me to increase scarcity. I'm incentived to provide less power, and get more profit. This logic is just not describing what happens in practice. If the government is giving someone monopoly power then yes, but under normal conditions someone trying to execute this strategy just goes bankrupt because competitors will undercut them in high demand periods and supply power in normal periods.

nobody9999 3y ago
>This logic is just not describing what happens in practice. If the government is giving someone monopoly power then yes, but under normal conditions someone trying to execute this strategy just goes bankrupt because competitors will undercut them in high demand periods and supply power in normal periods. That doesn't track with my experience (Northeastern US). While I can choose from multiple companies to provide me with electricity (using the extant infrastructure as mandated by the public utilities regulator), the owner of that infrastructure (in my case Consolidated Edison) charges more for delivering that electricity than the cost of the electricity itself. As such, it doesn't really matter who is providing my electricity -- I end up paying more for the "delivery infrastructure" regardless of my $/kwh costs.
irjustin 3y ago
> This logic is just not describing what happens in practice It is though just not in a way that's obvious. It's not free reign capitalism, there's government oversight to prevent the obvious price gouging. The issue is when that 20 year mark hits and no one was ready but the automated systems were allowed to charge uncapped, 180x normal rate[0]. The power company cut corners where it could, on winterization because "what are the chances of that happening"? Were low, but not zero. They had happened before in Texas's history but they just chose not to because it's relatively expensive to protect against 50 yr time horizons. [0] https://en.wikipedia.org/wiki/2021_Texas_power_crisis https://en.wikipedia.org/wiki/2021_Texas_power_crisis
- roenxi 3y ago
  > The issue is when that 20 year mark hits and no one was ready but the automated systems were allowed to charge uncapped, 180x normal rate[0]. That is actually relatively normal behaviour for an electricity market. In my area the price usually jumps 2 orders of magnitude at the height of summer. It isn't a concern (the grid is cooked, but not because of peak prices). The market is signalling that it is worth having capacity available just for the peak - the cost of that type of redundancy is high, so the prices need to be high to make it happen. Also, if the price is capped then the grid blacks out at that point. Uncapped is the way to go.

ethbr1 3y ago

Deregulation in high-capital, long-lead-time, must-serve markets like energy, telecom, and emergency medicine has generally ended badly. Because eventually someone realizes profit can be maximized by (minimizing investment) + (maximizing risk) + (increasing prices) + (appealing for government bailouts whenever catastrophe strikes). A utility commission that looks skeptically at rate increases, but in return provides a more stable rate that industry can use to plan long-term expansions against, works better. Yes, you have to deal with regulatory capture and ambivalence towards increasing efficiency and modernizing business -- but those are still solvable problems in a regulated environment.

mcbishop 3y ago
> has generally ended badly For a good example, watch the documentary: Enron: The Smartest Guys in the Room