The Two Hours That Nearly Destroyed Texas’s Electric Grid(bloomberg.com)
bloomberg.com
The Two Hours That Nearly Destroyed Texas’s Electric Grid
https://www.bloomberg.com/news/features/2021-02-20/texas-blackout-how-the-electrical-grid-failed
68 comments
https://archive.is/fSOMH
This does seem to demonstrate some limits of the market approach to critical infrastructure.
Is US, and Texas in particular a free market?
I was always saying that US is an extensively regulated, yet chaotic market.
There is no free capitalism in America.
US financial regulations are by far most Byzantine in the word, precluding the whole notion of US as a nation of free capitalism.
US construction industry is a caricature of regulatory capture. For example, even door knobs are legally regulated by some states with zero rationality given.
US laws governing infrastructure, and things like utility companies, and procurement of infrastructure engineering services are also very exemplary of regulatory capture becoming bordering on absurdity.
I was always saying that US is an extensively regulated, yet chaotic market.
There is no free capitalism in America.
US financial regulations are by far most Byzantine in the word, precluding the whole notion of US as a nation of free capitalism.
US construction industry is a caricature of regulatory capture. For example, even door knobs are legally regulated by some states with zero rationality given.
US laws governing infrastructure, and things like utility companies, and procurement of infrastructure engineering services are also very exemplary of regulatory capture becoming bordering on absurdity.
Is there a free capitalism nation on earth today? Is such a concept even sustainable in practice?
The electric grid in Texas is not meaningfully connected to the rest of the US to avoid federal regulation. The state has almost completely deregulated power generation in Texas. It's about as close to the mythical Free Market as can be imagined. Everything is driven by market forces, and the utilities responded by cutting costs.
According to a post here on HN a couple of days ago, ERCOT has more stringent regulations on winterization than the Federal regulatory body requires, so basically everything you just said is bullshit
ERCOT is a government regulated group, answerable to the Legislature. It's not meaningfully different from the rest of the country.
People just assume Texas is a completely unregulated market because of the reputation given to us by Hollywood. Unsurprisingly, media created in a region that disdains us does not represent us truthfully or fairly.
I grew up in Appalachia so I'm used to this treatment by the media and by people I interact with as a professional software engineer, including on this board, about where I came from and where I chose to make my home.
We know you hate us. It's the main message we receive every time we turn on the TV or any mainstream silicon valley website, including this one, again. That's why I post with a throwaway name. I don't expect people who hate us to represent us fairly.
ERCOT is a government regulated group, answerable to the Legislature. It's not meaningfully different from the rest of the country.
People just assume Texas is a completely unregulated market because of the reputation given to us by Hollywood. Unsurprisingly, media created in a region that disdains us does not represent us truthfully or fairly.
I grew up in Appalachia so I'm used to this treatment by the media and by people I interact with as a professional software engineer, including on this board, about where I came from and where I chose to make my home.
We know you hate us. It's the main message we receive every time we turn on the TV or any mainstream silicon valley website, including this one, again. That's why I post with a throwaway name. I don't expect people who hate us to represent us fairly.
>We know you hate us. It's the main message we receive every time we turn on the TV or any mainstream silicon valley website, including this one, again. That's why I post with a throwaway name. I don't expect people who hate us to represent us fairly.
It's unfortunate that you paint most of the the US with such a broad brush when complaining that those folks are painting you with a broad brush. I hope you can see the irony there.
I learned as a child that treating others as individuals is incredibly important. Mostly because it became clear that most folks (of every stripe) are decent human beings, but that there are a small number of people who are assholes.
The big problem with that small number of folks is that they aren't one particular group (whether that be geographic origin, ethnicity, melanin content, gender or profession, etc., etc., etc.). Rather they are pretty evenly distributed throughout society.
That allows people to point at those very few and ascribe their shortcomings to everyone in a particular group or groups.
The long and short of it is that, no "we" don't hate "you." In fact, most folks don't really care much (except in a general, "care about other human beings") one way or another about you or your fellow Texans.
Having spent time in Texas (I'm from the Northeast), I've found that just about everyone I've met in (or who is from) Texas are decent, kind human beings.
I suspect you'd be much happier if you were less concerned with what other folks think about you, and focused on living a decent life instead of shitting on people you don't know.
Just a crazy thought.
It's unfortunate that you paint most of the the US with such a broad brush when complaining that those folks are painting you with a broad brush. I hope you can see the irony there.
I learned as a child that treating others as individuals is incredibly important. Mostly because it became clear that most folks (of every stripe) are decent human beings, but that there are a small number of people who are assholes.
The big problem with that small number of folks is that they aren't one particular group (whether that be geographic origin, ethnicity, melanin content, gender or profession, etc., etc., etc.). Rather they are pretty evenly distributed throughout society.
That allows people to point at those very few and ascribe their shortcomings to everyone in a particular group or groups.
The long and short of it is that, no "we" don't hate "you." In fact, most folks don't really care much (except in a general, "care about other human beings") one way or another about you or your fellow Texans.
Having spent time in Texas (I'm from the Northeast), I've found that just about everyone I've met in (or who is from) Texas are decent, kind human beings.
I suspect you'd be much happier if you were less concerned with what other folks think about you, and focused on living a decent life instead of shitting on people you don't know.
Just a crazy thought.
I'm used to this treatment by the media and by people I interact with as a professional software engineer
Are the actual groups of people they’ve painted which doesn’t make for a particularly broad brush and certainly doesn’t include “most of the US”.
It’s unfortunate that you spend 7 paragraphs explaining a basic concept most children are indeed aware of while the person you’re replying to complains about that exact behavior. I hope you can see the irony there.
I suspect you’d be much more effective if you were less concerned with acting out a stereotype, and focused on reading the comment you’re replying to and addressing their point about bias in the media, and software industries.
Are the actual groups of people they’ve painted which doesn’t make for a particularly broad brush and certainly doesn’t include “most of the US”.
It’s unfortunate that you spend 7 paragraphs explaining a basic concept most children are indeed aware of while the person you’re replying to complains about that exact behavior. I hope you can see the irony there.
I suspect you’d be much more effective if you were less concerned with acting out a stereotype, and focused on reading the comment you’re replying to and addressing their point about bias in the media, and software industries.
>I suspect you’d be much more effective
Effective at what, exactly?
I expressed my thoughts WRT the comment to which I replied. I just re-read my comment and I said exactly what I wanted to say.
As far as I'm concerned, that's the "effectiveness" I was going for, and have achieved same.
Thanks for your advice, I'll give it the weight and influence to which it's due.
Effective at what, exactly?
I expressed my thoughts WRT the comment to which I replied. I just re-read my comment and I said exactly what I wanted to say.
As far as I'm concerned, that's the "effectiveness" I was going for, and have achieved same.
Thanks for your advice, I'll give it the weight and influence to which it's due.
I apologize, given the message of the comment and how personally addressed it was throughout, I had thought you’d meant to have a conversation with someone other than yourself.
>I apologize, given the message of the comment and how personally addressed it was throughout, I had thought you’d meant to have a conversation with someone other than yourself.
No apology is necessary or even slightly warranted. You expressed yourself clearly and, as I mentioned, I appreciate your point of view.
While you may (and I have no issue with that) disagree with my assessment, you appear to have ascribed some sort of broad-based attempt on my part to convince or "win over" some segment of HN readers to my point of view.
That's not the case. My goal was to express my thoughts. I did so. As such, my effort was (as I mentioned) quite effective in achieving my goal.
Whether or not that sparks further discussion isn't incredibly important to me, although I certainly have no problem having a conversation about the subject.
I disagree with your assessment that GP[0] was addressing their belief that "we hate" them to some narrow group in the US. Given the reach of "the media" and "mainstream silicon valley websites", it seems obvious that GP was, in fact, painting a huge swathe of the US population with a broad brush.
Given the DAUs of such "mainstream silicon valley websites" like Facebook, Twitter, Reddit, etc., as well as the broad reach of "the media" (newspapers, TV/radio networks, etc.), I don't see how GP's statement could be interpreted otherwise.
I'd be interested to understand the logic that leads you to a different conclusion. Thanks!
[0] https://news.ycombinator.com/item?id=26206567
Edit: Added the "missing link."
No apology is necessary or even slightly warranted. You expressed yourself clearly and, as I mentioned, I appreciate your point of view.
While you may (and I have no issue with that) disagree with my assessment, you appear to have ascribed some sort of broad-based attempt on my part to convince or "win over" some segment of HN readers to my point of view.
That's not the case. My goal was to express my thoughts. I did so. As such, my effort was (as I mentioned) quite effective in achieving my goal.
Whether or not that sparks further discussion isn't incredibly important to me, although I certainly have no problem having a conversation about the subject.
I disagree with your assessment that GP[0] was addressing their belief that "we hate" them to some narrow group in the US. Given the reach of "the media" and "mainstream silicon valley websites", it seems obvious that GP was, in fact, painting a huge swathe of the US population with a broad brush.
Given the DAUs of such "mainstream silicon valley websites" like Facebook, Twitter, Reddit, etc., as well as the broad reach of "the media" (newspapers, TV/radio networks, etc.), I don't see how GP's statement could be interpreted otherwise.
I'd be interested to understand the logic that leads you to a different conclusion. Thanks!
[0] https://news.ycombinator.com/item?id=26206567
Edit: Added the "missing link."
> Given the reach of "the media" and "mainstream silicon valley websites"
Their reach isn't the point, it's their source. Another name for the group/phenoma they're referring to is "coastal elites", who use the derogatory term "flyover states" to refer to where OP is from.
Their reach isn't the point, it's their source. Another name for the group/phenoma they're referring to is "coastal elites", who use the derogatory term "flyover states" to refer to where OP is from.
I didn't realize that every post on twitter, Facebook and Reddit was exclusively posted by the owners of said sites. Oh, wait.
I'd also point out that almost 40% of the US population live in coastline counties[0]. So even if the OP's claim is that "those on the coasts hate" Texans, that's still painting an enormous group (~127 million people) with the same broad brush.
[0] https://oceanservice.noaa.gov/facts/population.html
I'd also point out that almost 40% of the US population live in coastline counties[0]. So even if the OP's claim is that "those on the coasts hate" Texans, that's still painting an enormous group (~127 million people) with the same broad brush.
[0] https://oceanservice.noaa.gov/facts/population.html
> Another name for the group/phenoma they're referring to is "coastal elites", who use the derogatory term "flyover states" to refer to where OP is from.
The term "flyover state" is not necessarily a derrogatory term, but a way for citizens of said states to underline an artificial division between rural central regions and urban coastal regions.
In fact, the "flyover" nature of said regions is due to the sparsely populated and low density of those territories, not because of some disdain towards inhabitants of rural regions.
https://en.wikipedia.org/wiki/Flyover_country
https://en.wikipedia.org/wiki/List_of_states_and_territories...
The term "flyover state" is not necessarily a derrogatory term, but a way for citizens of said states to underline an artificial division between rural central regions and urban coastal regions.
In fact, the "flyover" nature of said regions is due to the sparsely populated and low density of those territories, not because of some disdain towards inhabitants of rural regions.
https://en.wikipedia.org/wiki/Flyover_country
https://en.wikipedia.org/wiki/List_of_states_and_territories...
> Just a crazy thought.
Well said. It's a shame that basic things like the importance of treating everyone with respect is required to be reinforced in public forums.
Well said. It's a shame that basic things like the importance of treating everyone with respect is required to be reinforced in public forums.
> ERCOT has more stringent regulations on winterization
Those are voluntary though.
It was inevitable that someone would say the problem was that it wasn't deregulated enough, but let's at least stick to what's known. "Instead of taking any regulatory action, we ended up getting guidelines that were unenforceable and largely ignored in [power companies’] rush for profits," https://www.texastribune.org/2021/02/17/texas-power-grid-fai...
Those are voluntary though.
It was inevitable that someone would say the problem was that it wasn't deregulated enough, but let's at least stick to what's known. "Instead of taking any regulatory action, we ended up getting guidelines that were unenforceable and largely ignored in [power companies’] rush for profits," https://www.texastribune.org/2021/02/17/texas-power-grid-fai...
> Those are voluntary though.
It should be made quite clear that "voluntary" regulation is no regulation at all, but mere suggestions and tips that anyone is free to follow or ignore.
Thus, citing ERCOT is pointless, and would make as much sense as citing regulations of Kazakhstan as they are enforced with the same rigour and result in the same penalties.
It should be made quite clear that "voluntary" regulation is no regulation at all, but mere suggestions and tips that anyone is free to follow or ignore.
Thus, citing ERCOT is pointless, and would make as much sense as citing regulations of Kazakhstan as they are enforced with the same rigour and result in the same penalties.
"According to a post here on HN a couple of days ago, ERCOT has more stringent regulations on winterization than the Federal regulatory body requires, so basically everything you just said is bullshit"
This a lie. The regulations are voluntary.
"ERCOT is a government regulated group, answerable to the Legislature. It's not meaningfully different from the rest of the country."
Except this is also a lie as Ercot as no power to enforce any of its regulations which is not the way utilities run in the rest of the country.
"People just assume Texas is a completely unregulated market because of the reputation given to us by Hollywood. Unsurprisingly, media created in a region that disdains us does not represent us truthfully or fairly."
This is a typical attempt to create a state of victimhood in order shift focus away from the obvious failure of a Republican controlled state onto meaningless culture wars.
"I grew up in Appalachia so I'm used to this treatment by the media and by people I interact with as a professional software engineer, including on this board, about where I came from and where I chose to make my home."
Irrelevant to the topic at hand. Your personal experiences in this matter have nothing to do with the failures in the Texas energy grid. You are doubling down on perceived victimhood in lieu of an actual argument.
"We know you hate us. It's the main message we receive every time we turn on the TV or any mainstream silicon valley website, including this one, again. That's why I post with a throwaway name. I don't expect people who hate us to represent us fairly."
And this was the goal of the comment, specifically overriding any consideration of criticism by attacking the motives of the critic. This is as simple as it is disingenuous.
This a lie. The regulations are voluntary.
"ERCOT is a government regulated group, answerable to the Legislature. It's not meaningfully different from the rest of the country."
Except this is also a lie as Ercot as no power to enforce any of its regulations which is not the way utilities run in the rest of the country.
"People just assume Texas is a completely unregulated market because of the reputation given to us by Hollywood. Unsurprisingly, media created in a region that disdains us does not represent us truthfully or fairly."
This is a typical attempt to create a state of victimhood in order shift focus away from the obvious failure of a Republican controlled state onto meaningless culture wars.
"I grew up in Appalachia so I'm used to this treatment by the media and by people I interact with as a professional software engineer, including on this board, about where I came from and where I chose to make my home."
Irrelevant to the topic at hand. Your personal experiences in this matter have nothing to do with the failures in the Texas energy grid. You are doubling down on perceived victimhood in lieu of an actual argument.
"We know you hate us. It's the main message we receive every time we turn on the TV or any mainstream silicon valley website, including this one, again. That's why I post with a throwaway name. I don't expect people who hate us to represent us fairly."
And this was the goal of the comment, specifically overriding any consideration of criticism by attacking the motives of the critic. This is as simple as it is disingenuous.
That reputation doesn't come from Hollywood, it comes from Texas. Anyone who's been to the state knows how proud the culture is of its wild-west rural outlaw image.
You're right that it isn't entirely accurate, because Texas is a diverse state bigger than some countries, but being the quirky cowboy state is a lot better for tourism than being the... like... corn state or... whatever the hell a "Sooner" is. Some sort of groundhog I imagine.
You're right that it isn't entirely accurate, because Texas is a diverse state bigger than some countries, but being the quirky cowboy state is a lot better for tourism than being the... like... corn state or... whatever the hell a "Sooner" is. Some sort of groundhog I imagine.
> whatever the hell a "Sooner" is
The US decided to sell the land in most of Oklahoma (the parts that weren't Indian territory, in any case) by land rushes. You would line up at the county border, a starting gun would be fired, and the first person to claim a plot of land would get it. Sooners are the people who were in the county before the starting gun was fired, letting them (illegally) claim the land before anyone who was honest and started at the starting line.
(Side note: my great-great grandfather was in one of the Oklahoma land rushes, but lost the land he wanted to a Sooner.)
The US decided to sell the land in most of Oklahoma (the parts that weren't Indian territory, in any case) by land rushes. You would line up at the county border, a starting gun would be fired, and the first person to claim a plot of land would get it. Sooners are the people who were in the county before the starting gun was fired, letting them (illegally) claim the land before anyone who was honest and started at the starting line.
(Side note: my great-great grandfather was in one of the Oklahoma land rushes, but lost the land he wanted to a Sooner.)
"Sooner" - the bain of UT football existence now that TAMU is playing with the big boys.
"According to a post here on HN a couple of days ago, ERCOT has more stringent regulations on winterization than the Federal regulatory body requires, so basically everything you just said is bullshit"
Do you have a link to this claim? If this is true what does enforcement of those regulations look like in Texas?
For comparison, THC is still schedule 1 drug according to federal regulations but weed is also a multi-billion dollar industry in states that ignore those regulations. Whats on the books often matters less than what is actually enforced.
Do you have a link to this claim? If this is true what does enforcement of those regulations look like in Texas?
For comparison, THC is still schedule 1 drug according to federal regulations but weed is also a multi-billion dollar industry in states that ignore those regulations. Whats on the books often matters less than what is actually enforced.
Found it. The guidelines mentioned in the parent comment are voluntary. As I stated enforcement matters and in the Texas case there was none. However, in this case the Texas reputation for willful ignorance in the face of honest criticism is well earned. Oh and by the way El Paso's electricity provider didn't have problems, why? They aren't governed by Ercot and their voluntary regulations. El Paso is part of the western international grid and did perform winterization work as required. Outcomes matter not political platitudes.
https://www.texastribune.org/2021/02/17/texas-power-grid-fai...
https://www.texastribune.org/2021/02/17/texas-power-grid-fai...
> According to a post here on HN a couple of days ago, ERCOT has more stringent regulations on winterization than the Federal regulatory body requires, so basically everything you just said is bullshit
Do you have a source for this? The entire purpose for Texas independent grid is to avoid federal regulation, so I find this hard to believe.
Also, the idea that democrats hate you is mostly from the right and IMO incorrect. Many on the left hate Trump, just like people on the right hate AOC. But that doesn't extend to the average person.
Right leaning media in the US is notorious for fear based reporting. You don't have to look far to see that there's no left leaning equivalence to Rush Limbaugh, Alex Jones, Tucker Carlson, and similar right wing icons that sell news largely on fear and outrage. They sell views based on the idea that democrats are destroying America. This is also the basis of the Tea Party, Pizza gate, and QAnon which also have no left equivalent.
There's a reason why most mainstream media is sedate and frankly boring. Democrats are the party of change, and Republicans have to keep their base afraid so they go vote against it. A lot more Republicans think democrats hate them than the other way around. Because Republicans need it that way to be competitive.
I used to be a republican until I got tired of the constant fear porn. Democrats have been in charge for a large part of my life and the only thing to directly effect me was the ACA which turned out to be a net positive in my life. Nothing scary the Republican pundits always raged about came to pass and I got tired of always being worried about the next big disaster that never came.
Do you have a source for this? The entire purpose for Texas independent grid is to avoid federal regulation, so I find this hard to believe.
Also, the idea that democrats hate you is mostly from the right and IMO incorrect. Many on the left hate Trump, just like people on the right hate AOC. But that doesn't extend to the average person.
Right leaning media in the US is notorious for fear based reporting. You don't have to look far to see that there's no left leaning equivalence to Rush Limbaugh, Alex Jones, Tucker Carlson, and similar right wing icons that sell news largely on fear and outrage. They sell views based on the idea that democrats are destroying America. This is also the basis of the Tea Party, Pizza gate, and QAnon which also have no left equivalent.
There's a reason why most mainstream media is sedate and frankly boring. Democrats are the party of change, and Republicans have to keep their base afraid so they go vote against it. A lot more Republicans think democrats hate them than the other way around. Because Republicans need it that way to be competitive.
I used to be a republican until I got tired of the constant fear porn. Democrats have been in charge for a large part of my life and the only thing to directly effect me was the ACA which turned out to be a net positive in my life. Nothing scary the Republican pundits always raged about came to pass and I got tired of always being worried about the next big disaster that never came.
Rolling blackouts are inherently a regulatory solution. The market solution in a supply crunch is keep raising prices until demand falls below supply, which creates a market incentive to have excess capacity and capture those profits during periods like this. An unwillingness to do that creates foreseeable market incentives. Not enough suppliers spend the money to have the capacity to meet demand if regulators are going to suppress demand through regulation (rolling blackouts) rather than higher prices.
So consumers shouldn't be allowed to sign forward contracts in a deregulated market?
Doesn't matter. If people sign those contracts then the floating prices would go even higher for the people who didn't, or the people who made the contracts would start offering to pay people money to shed demand (because they're still paying the floating price for what they're reselling), and the seller risk of having one of those contracts might correspondingly be high enough that people avoid them due to high fixed prices.
Funny thing, in Texas there is variable pricing and some people had to pay thousands over the five day freeze[1] in addition to rolling blackouts. I experienced neither as my power was out for 3.5 days.
[1] https://www.dallasnews.com/business/2021/02/20/griddy-custom...
[1] https://www.dallasnews.com/business/2021/02/20/griddy-custom...
Griddy is its own thing; it lets consumers buy at wholesale prices which is pretty unique. The great majority of people in Texas have fixed-rates and are unaffected by the price shifts. Traders and providers are eating the brunt of it (and some have gone bankrupt)
"In addition to the rolling blackouts" still implies rolling blackouts. If you have rolling blackouts at all then people pay $4000 instead of $9000 and there is that much less incentive for anyone to have built adequate capacity.
Also, this:
> And as blackouts spread across the state, power was cut not only to homes and businesses but to the compressor stations that power natural gas pipelines — further cutting off the flow of supplies to power plants.
Regulatory action exacerbates supply shortage; market blamed.
Also, this:
> And as blackouts spread across the state, power was cut not only to homes and businesses but to the compressor stations that power natural gas pipelines — further cutting off the flow of supplies to power plants.
Regulatory action exacerbates supply shortage; market blamed.
What regulatory action are you talking about? Grid operators cut power to keep the system from failing catastrophically as the generating power available dropped and the frequency dipped from the desired 60hz to 59.93hz and falling. Nobody running the system needed a regulator to tell them to shut down power.
"Grid operators" are the regulators. They're the people the government by statute gives regulatory authority over the grid.
The alternative to forcefully disconnecting people is to get people to volunteer because the prices for not doing so are higher they want to pay.
It's plausible that they had an information problem that should be addressed, i.e. people didn't realize that they're paying dollars rather than cents per kWh and correspondingly didn't cut usage. Maybe some kind of messaging system where everyone gets a text message estimating their monthly electric bill at their current usage and price, causing tons of people to say "oh crap" and go do something about it.
The alternative to forcefully disconnecting people is to get people to volunteer because the prices for not doing so are higher they want to pay.
It's plausible that they had an information problem that should be addressed, i.e. people didn't realize that they're paying dollars rather than cents per kWh and correspondingly didn't cut usage. Maybe some kind of messaging system where everyone gets a text message estimating their monthly electric bill at their current usage and price, causing tons of people to say "oh crap" and go do something about it.
Or recognize that inelastic demand meeting inelastic supply can only produce a terrible price signal, and have a capacity market like every other grid operator.
I was kind of wondering when the "it's still too regulated" people would show up and start telling lies that are easily refuted. https://www.pbs.org/wgbh/pages/frontline/shows/blackout/cali...
California's infamous corruption and incompetence has now turned the true fact that Texas used rolling blackouts into "lies that are easily refuted".
And was that corruption and incompetence allowed to take root and have devastating affects? Was it not the result of insufficient and lax regulation?
Competitive free markets for electricity don't exist in general, because the last mile transmission is a natural monopoly. A monopoly isn't a competitive free market. That's the same reason the government itself is so bad at everything -- it's a monopoly that doesn't have to respond to competitive pressure.
Generation can be a competitive market. It's not a natural monopoly. But it's interfacing with the one for last mile power transmission.
The problem you have then is that it's susceptible to regulatory corruption and incompetence. That's not the same thing as "insufficient and lax regulation." The problem isn't that the regulation was lacking in intensity. There isn't a volume knob where you can turn up the general amount of regulation and solve the problem. You need to fix the specific defect. Adding a bunch of other irrelevant rules does nothing.
In California that defect was that the generating companies bought up their competitors and purposely shut down a lot of generating capacity because the regulations were written in such a way that they could only charge high prices during a supply shortfall. So they manufactured one.
There are different ways to handle that. It was plausibly a violation of existing antitrust laws, so the problem wasn't even a lack of regulation, it was a lack of enforcement. The monopoly could have used a different pricing structure that pays generators a given amount to maintain idle generating capacity in case of a shortfall, causing it to be more profitable to not destroy existing generating capacity. Or any number of alternatives.
None of this is incompatible with the idea of having a competitive market for power generation. And it's also still not the thing that happened in Texas.
Generation can be a competitive market. It's not a natural monopoly. But it's interfacing with the one for last mile power transmission.
The problem you have then is that it's susceptible to regulatory corruption and incompetence. That's not the same thing as "insufficient and lax regulation." The problem isn't that the regulation was lacking in intensity. There isn't a volume knob where you can turn up the general amount of regulation and solve the problem. You need to fix the specific defect. Adding a bunch of other irrelevant rules does nothing.
In California that defect was that the generating companies bought up their competitors and purposely shut down a lot of generating capacity because the regulations were written in such a way that they could only charge high prices during a supply shortfall. So they manufactured one.
There are different ways to handle that. It was plausibly a violation of existing antitrust laws, so the problem wasn't even a lack of regulation, it was a lack of enforcement. The monopoly could have used a different pricing structure that pays generators a given amount to maintain idle generating capacity in case of a shortfall, causing it to be more profitable to not destroy existing generating capacity. Or any number of alternatives.
None of this is incompatible with the idea of having a competitive market for power generation. And it's also still not the thing that happened in Texas.
I have a hard time understanding how such a system would work in an emergency. So when production is crippled and demand is soaring, some producers voluntarily decide "Well this is too much hassle, I need to be paid more!" and restaurant owners get the electricity bills and say "WTF? Tim, kick out everyone and turn off the light, we're closed now, they're charging us fifty thousand dollars and we can't afford to pay any more!" and all of this is supposed to happen within two hours before the infrastructure melts down?
I mean, who checks their electricity bill every two hours?
I mean, who checks their electricity bill every two hours?
You might imagine a world in which everyone knows that electricity prices are dynamic and frequently changing. In a regime like this and under the recent circumstances in Texas, yes, you would expect businesses and people to rapidly change their behavior in order to not incur a giant electricity bill. Under limited generation with hugely inflated prices, only those entities that both need and could afford it will use electricity. What you have under this regime is a much more efficient use of electrical power in constrained circumstances.
Since electricity prices are mostly fixed[1] this type of price discovery cannot exist and everyone pretty much goes on using electricity as per usual during periods of shortage, leading to blackouts.
On the face of it, it seems like the market price regime might be preferable, but one has to remember that economic efficiency isn't the only thing we're optimizing for a society. Instead policy makers have decided that having low electricity prices for everyone is more important than maximizing efficiency with respect to power generation. I'm inclined to agree with them. The downside to this approach is that you have to invest more into making sure that you never run into these shortage events - otherwise you end up with the disaster that happened in Texas. That said, I can't imagine a free-floating price regime would have left Texas better off; instead the real world outcome probably would have been about the same: most people would have voluntarily turned off their power (or would have been 'margin called' by their utilities when they ran up huge bills inadvertently). Better efficiency, but similar outcome.
[1] Apparently one of the providers in Texas was called Griddy, which had a novel model where they did charge floating rates for electricity. Not coincidentally, they advised their customers to switch providers or risk enormous energy bills.
Since electricity prices are mostly fixed[1] this type of price discovery cannot exist and everyone pretty much goes on using electricity as per usual during periods of shortage, leading to blackouts.
On the face of it, it seems like the market price regime might be preferable, but one has to remember that economic efficiency isn't the only thing we're optimizing for a society. Instead policy makers have decided that having low electricity prices for everyone is more important than maximizing efficiency with respect to power generation. I'm inclined to agree with them. The downside to this approach is that you have to invest more into making sure that you never run into these shortage events - otherwise you end up with the disaster that happened in Texas. That said, I can't imagine a free-floating price regime would have left Texas better off; instead the real world outcome probably would have been about the same: most people would have voluntarily turned off their power (or would have been 'margin called' by their utilities when they ran up huge bills inadvertently). Better efficiency, but similar outcome.
[1] Apparently one of the providers in Texas was called Griddy, which had a novel model where they did charge floating rates for electricity. Not coincidentally, they advised their customers to switch providers or risk enormous energy bills.
They obviously need (and apparently lack) some kind of system for notifying people when prices are spiking unusually high so that exactly that can happen.
So, let's say I'm a consumer in Texas, and the power company says, "Here's the power plan - there's no flat plan because we don't have to offer you one. But there's plan A which will charge you exorbitant prices when we want to, and there's an even more expensive plan B, but plan B comes with its own alarm system so you will know when the price is skyrocketing. The alarm will activate maybe once in next ten years, and you will just have to trust us that it will work when it needs to."
Then, being a good free-market consumer, I should of course choose plan B... wait, there's no regulation, so there's no reason for me to believe plan B actually works as advertised. So of course I should pay $$$ to hire an auditor who goes through the company's infrastructure and certify that what they're saying is actually correct. Actually, the auditor had better keep an eye on the company from now on, because even if plan B is will-maintained now there's no guarantee that it will continue to be.
But of course I can't afford such an auditor by myself - it would be really convenient if there's an organization that I can join, with a bit of membership fee, and then it certifies these plans, and maybe they need to have some actual teeth, because otherwise how would we know the company isn't lying its ways through.
Hmm, this free market is getting really complicated, it might be nice if there's some kind of blueprint, let's say, a prototypical organization that takes membership fees and holds these companies responsible for their words ...
Then, being a good free-market consumer, I should of course choose plan B... wait, there's no regulation, so there's no reason for me to believe plan B actually works as advertised. So of course I should pay $$$ to hire an auditor who goes through the company's infrastructure and certify that what they're saying is actually correct. Actually, the auditor had better keep an eye on the company from now on, because even if plan B is will-maintained now there's no guarantee that it will continue to be.
But of course I can't afford such an auditor by myself - it would be really convenient if there's an organization that I can join, with a bit of membership fee, and then it certifies these plans, and maybe they need to have some actual teeth, because otherwise how would we know the company isn't lying its ways through.
Hmm, this free market is getting really complicated, it might be nice if there's some kind of blueprint, let's say, a prototypical organization that takes membership fees and holds these companies responsible for their words ...
> They obviously need (and apparently lack) some kind of system for notifying people when prices are spiking unusually high so that exactly that can happen.
I fail to see how this classifies as a free market solution. If customers are not free to choose their supplier, and providers can whimsically just abuse their dominant position to hike prices at will, then that's not a free market at all. It just sounds like a monopolistic market dictating price hikes whenever they feel like it without fear of any consequence.
I fail to see how this classifies as a free market solution. If customers are not free to choose their supplier, and providers can whimsically just abuse their dominant position to hike prices at will, then that's not a free market at all. It just sounds like a monopolistic market dictating price hikes whenever they feel like it without fear of any consequence.
The issue is not one of supply, but of generation. It wasn't sufficiently weather-proofed. It's entirely possible that it isn't profitable for them to do the winter-proofing. It's only needed once every decade or two.
This also ignores that power demand is largely inelastic during a winter storm in a state where homes are not built to withstand them. That introduces a cap to how high the prices can go. At a certain point, people are going to consume power to stay alive and then just declare bankruptcy on their $15,000 power bill. Or if your free market doesn't allow bankruptcy, they simply won't be able to pay it back.
It's entirely possible that the prices the market can bear before customers start becoming insolvent isn't enough to pay for the winterizing. They keep publishing those studies about how most people in the US can't afford an unexpected $200 or $500 bill. That's not a lot of room for prices to go up. The market rates put some people's power bill up by several thousand dollars for this month.
I can see how having to maintain winterizing equipment for a decade to get 10x the profits for a week might not be profitable.
This also ignores that power demand is largely inelastic during a winter storm in a state where homes are not built to withstand them. That introduces a cap to how high the prices can go. At a certain point, people are going to consume power to stay alive and then just declare bankruptcy on their $15,000 power bill. Or if your free market doesn't allow bankruptcy, they simply won't be able to pay it back.
It's entirely possible that the prices the market can bear before customers start becoming insolvent isn't enough to pay for the winterizing. They keep publishing those studies about how most people in the US can't afford an unexpected $200 or $500 bill. That's not a lot of room for prices to go up. The market rates put some people's power bill up by several thousand dollars for this month.
I can see how having to maintain winterizing equipment for a decade to get 10x the profits for a week might not be profitable.
> The issue is not one of supply, but of generation.
Generation is supply. If it freezes, supply decreases.
> It's entirely possible that it isn't profitable for them to do the winter-proofing. It's only needed once every decade or two.
In which case once every decade or two you have to suppress demand through pricing.
> This also ignores that power demand is largely inelastic during a winter storm in a state where homes are not built to withstand them.
You can get your house to zero electricity. Drain the pipes etc. and turn off the main breaker.
You're not going to want to live in it then, but staying in a hotel for a few days costs a lot less than $15,000.
There are also less drastic alternatives which would be taken by people with the ability, e.g. a lot of people have gas generators. Give them a sufficient price incentive and they switch off the grid and use their generator. Which happens at a lower price than it takes to cause people to move out, so it happens first.
Compare this to rolling blackouts where you just freeze people at random without notice and their pipes burst and flood their home etc.
Generation is supply. If it freezes, supply decreases.
> It's entirely possible that it isn't profitable for them to do the winter-proofing. It's only needed once every decade or two.
In which case once every decade or two you have to suppress demand through pricing.
> This also ignores that power demand is largely inelastic during a winter storm in a state where homes are not built to withstand them.
You can get your house to zero electricity. Drain the pipes etc. and turn off the main breaker.
You're not going to want to live in it then, but staying in a hotel for a few days costs a lot less than $15,000.
There are also less drastic alternatives which would be taken by people with the ability, e.g. a lot of people have gas generators. Give them a sufficient price incentive and they switch off the grid and use their generator. Which happens at a lower price than it takes to cause people to move out, so it happens first.
Compare this to rolling blackouts where you just freeze people at random without notice and their pipes burst and flood their home etc.
You assume that hotels will have power.
You assume that the hotels won’t also be charging market rates of thousands of dollars per day.
You assume that any of these such mythical hotels that have power, and are open, and aren’t charging thousands of dollars a night, will actually have any vacancy that you can fill
All these assumptions were recently proven false down here in Austin.
You assume that the hotels won’t also be charging market rates of thousands of dollars per day.
You assume that any of these such mythical hotels that have power, and are open, and aren’t charging thousands of dollars a night, will actually have any vacancy that you can fill
All these assumptions were recently proven false down here in Austin.
I very doubt this. Even the choice of word "council" for Texas grid authority gives off smell of a bureaucratic talkshop.
It demonstrates irrational faith in the Free Market Fairy: https://bitworking.org/news/2008/01/the-free-market-fairy/
Hmmmm...this doesn’t seem correct...
“ there never would have been a space program to hand over unless the government had done the initial leg work”
Except that the government intervened into an already free market. You see, the government has little interest in rocketry [0]. At least not until it affected war and ballistic nuclear missiles. So this article is distorting something to serve its own purposes.
I would suggest that what we all want is as much freedom to do what we what while having as low harm to others as society will accept before the trade offs go in the other direction.
[0] - https://www.nasa.gov/missions/research/f_goddard.html
“ there never would have been a space program to hand over unless the government had done the initial leg work”
Except that the government intervened into an already free market. You see, the government has little interest in rocketry [0]. At least not until it affected war and ballistic nuclear missiles. So this article is distorting something to serve its own purposes.
I would suggest that what we all want is as much freedom to do what we what while having as low harm to others as society will accept before the trade offs go in the other direction.
[0] - https://www.nasa.gov/missions/research/f_goddard.html
This starts off as a bit of a rant, but skipping ahead to “Stop the Magic”, the author lays out the concept of market externalities, and government’s necessary duty to manage them, rather well.
It boils down to the fact that markets don’t plan for things they can’t “see.” Extreme weather like this has not happened in ages in Texas so there was no price signal for it.
That isn't a problem unique to markets. Regulators frequently ignore foreseeable events like aquifer depletion and climate change until something sufficiently catastrophic happens to force them to take notice. Democrats in full control of the federal government for a month now, where's my carbon tax?
People also like to stomp on what the free market would actually have to do to prevent this. For a rare event, the cost of surviving it (i.e. winterizing everything) would have to be paid from revenues collected entirely during the event in order to give providers the incentive to do it. Otherwise the ones who don't would have an advantage at all other times. In other words, people might have to be paying tens of thousands of dollars this month for electricity to cover the cost.
And it's entirely possible that that isn't actually worth the expense. In that case what the market would do is raise the active price to something not that high, but high enough to curtail demand to what the grid could supply. So enough to cause some people to turn off their electric heat and drain their pipes and take a vacation to Cancun because it's cheaper than staying and paying that electric bill.
And then you don't get shutdowns, and that may actually be the most efficient solution, but people don't like it and put pressure on regulators to prevent prices from spiking that high. But there goes your price signal telling the market to winterize things.
People also like to stomp on what the free market would actually have to do to prevent this. For a rare event, the cost of surviving it (i.e. winterizing everything) would have to be paid from revenues collected entirely during the event in order to give providers the incentive to do it. Otherwise the ones who don't would have an advantage at all other times. In other words, people might have to be paying tens of thousands of dollars this month for electricity to cover the cost.
And it's entirely possible that that isn't actually worth the expense. In that case what the market would do is raise the active price to something not that high, but high enough to curtail demand to what the grid could supply. So enough to cause some people to turn off their electric heat and drain their pipes and take a vacation to Cancun because it's cheaper than staying and paying that electric bill.
And then you don't get shutdowns, and that may actually be the most efficient solution, but people don't like it and put pressure on regulators to prevent prices from spiking that high. But there goes your price signal telling the market to winterize things.
If the democrats snapped their fingers and implemented a carbon tax, it would just cause violence and people to starve, not push us into green energy. The infrastructure just doesn't exist.
The way you implement a carbon tax is by refunding all of the money to the citizens. The average poor person comes out ahead, because they have less living space requiring less heating and drive a smaller (more efficient) car or take public transit, so they already use less carbon than average and the dividend is more than they pay in tax. Also, some of the tax is paid by corporations but all of the dividend goes to individuals. Nobody starves.
But it causes electric cars that avoid the carbon tax to have a market advantage over gasoline powered cars, so more people buy those. It causes non-carbon power generation methods to have a market advantage, so more people build those. As the infrastructure gets built to replace carbon, the amount of the dividend declines, but only because people are paying less in carbon tax because everyone is burning less carbon.
But it causes electric cars that avoid the carbon tax to have a market advantage over gasoline powered cars, so more people buy those. It causes non-carbon power generation methods to have a market advantage, so more people build those. As the infrastructure gets built to replace carbon, the amount of the dividend declines, but only because people are paying less in carbon tax because everyone is burning less carbon.
But Americans already pay absurdly low prices for energy compared to us Europeans who are not exactly wealthier. The problem with Americans wanting to "copy" us is that they don't want to understand you have to pay noo, Bill Gates only paying exactly cut it.
Agree this is the way forward, but I don't believe for a second the Democrats would implement it this way. It just isn't political leaders' style to help the poor in America.
Revenue neutral carbon tax. With a slowly increasing price.
They did it in British Columbia.
I’m a big fan of this approach, which is actually bipartisan-ly designed.
https://clcouncil.org/
Check the video in that link.
They did it in British Columbia.
I’m a big fan of this approach, which is actually bipartisan-ly designed.
https://clcouncil.org/
Check the video in that link.
I wouldn't be quite so extreme, but I think it would absolutely cause a populist backlash similar to the yellow vest protests in France (but probably more far-right because this is America).
A carbon tax is regressive. All energy and resource taxes are regressive, since the rich can easily afford more expensive energy. Carbon restrictions are also regressive on a macroeconomic global scale as poorer countries are often more reliant on older and simpler fossil fuel technologies. The only exceptions there are countries with a lot of hydroelectric resources (which is also an old proven tech). A stricter international climate accord would severely punish or even bankrupt many poorer countries, while richer countries would be able to afford newer "green" energy or nuclear power. Both of these are too expensive and technically sophisticated for early stage developing nations.
I really think just investing heavily in the build out of alternatives is a far better strategy and the only non-regressive way to do it. Build and scale the new stuff until it can compete on price with the old stuff and then set the market loose. Since the new stuff is now cheaper, the market will replace the old stuff. Meanwhile as we use more fossil fuels they are getting more costly to obtain, so it's really when the two curves intersect that change will happen.
A carbon tax is regressive. All energy and resource taxes are regressive, since the rich can easily afford more expensive energy. Carbon restrictions are also regressive on a macroeconomic global scale as poorer countries are often more reliant on older and simpler fossil fuel technologies. The only exceptions there are countries with a lot of hydroelectric resources (which is also an old proven tech). A stricter international climate accord would severely punish or even bankrupt many poorer countries, while richer countries would be able to afford newer "green" energy or nuclear power. Both of these are too expensive and technically sophisticated for early stage developing nations.
I really think just investing heavily in the build out of alternatives is a far better strategy and the only non-regressive way to do it. Build and scale the new stuff until it can compete on price with the old stuff and then set the market loose. Since the new stuff is now cheaper, the market will replace the old stuff. Meanwhile as we use more fossil fuels they are getting more costly to obtain, so it's really when the two curves intersect that change will happen.
>And it's entirely possible that that isn't actually worth the expense
Strange that every other state in the US affords this, but somehow Texas can't.
Strange that every other state in the US affords this, but somehow Texas can't.
> People also like to stomp on what the free market would actually have to do to prevent this. For a rare event, the cost of surviving it (i.e. winterizing everything) would have to be paid from revenues collected entirely during the event in order to give providers the incentive to do it.
I highly doubt this. We had the same thing happen in 2011; in theory the increased rates should have paid for winterization then, especially given how another similar storm would have put those who had winterized properly at an advantage in providing a limited resource with increased demand. That's especially true given that various figures put the cost of winterizing gas wells or wind turbines at 10% or less of the cost of the system without it [1]. But that didn't happen. It seems to me that gambling that your plant can produce during increased demand with no additional investment has worked out well for many companies [2]. To me that signals an incentive for power produces to actively work _against_ winterization regulation, as you could potentially make record profits on the backs of others' misfortunes, and if no one else winterizes you have less sure competitors to potentially drive the price down during increased demand.
> So enough to cause some people to turn off their electric heat and drain their pipes and take a vacation to Cancun because it's cheaper than staying and paying that electric bill.
This is predicated on the assumption that people were able to leave their houses, don't have pets / elderly family members that can't be moved, that they could all get flight tickets, that airlines were still actively running, that airline tickets wouldn't see surge pricing due to demand, and so many other factors.
I killed everything in my house save for my laptop to work as best as I could, my fridge, and my gas heat turned down to 62. At the highest rate they posted I would have been paying $180/day just for those. I can afford that, being a two person household who both work full time at significantly above average rates for the area. I would wager most people around here would not be able to pay ~$700 over 4 days just for a minimal amount of power on top of other storm damage costs, nor would it be less expensive or even possible to pack up and leave. Then they would be faced with "do we try to go without water for 4+ days" or risk freezing pipes, or paying hundreds of dollars just for the luxury of not freezing.
Maybe I'm cynical, but I believe if the options are "pay an extra-ordinate rate" or "potentially freeze to death" then the system itself is broken.
[1] https://www.texastribune.org/2021/02/20/texas-power-grid-win.... [2] https://www.houstonchronicle.com/business/article/jerry-jone...
I highly doubt this. We had the same thing happen in 2011; in theory the increased rates should have paid for winterization then, especially given how another similar storm would have put those who had winterized properly at an advantage in providing a limited resource with increased demand. That's especially true given that various figures put the cost of winterizing gas wells or wind turbines at 10% or less of the cost of the system without it [1]. But that didn't happen. It seems to me that gambling that your plant can produce during increased demand with no additional investment has worked out well for many companies [2]. To me that signals an incentive for power produces to actively work _against_ winterization regulation, as you could potentially make record profits on the backs of others' misfortunes, and if no one else winterizes you have less sure competitors to potentially drive the price down during increased demand.
> So enough to cause some people to turn off their electric heat and drain their pipes and take a vacation to Cancun because it's cheaper than staying and paying that electric bill.
This is predicated on the assumption that people were able to leave their houses, don't have pets / elderly family members that can't be moved, that they could all get flight tickets, that airlines were still actively running, that airline tickets wouldn't see surge pricing due to demand, and so many other factors.
I killed everything in my house save for my laptop to work as best as I could, my fridge, and my gas heat turned down to 62. At the highest rate they posted I would have been paying $180/day just for those. I can afford that, being a two person household who both work full time at significantly above average rates for the area. I would wager most people around here would not be able to pay ~$700 over 4 days just for a minimal amount of power on top of other storm damage costs, nor would it be less expensive or even possible to pack up and leave. Then they would be faced with "do we try to go without water for 4+ days" or risk freezing pipes, or paying hundreds of dollars just for the luxury of not freezing.
Maybe I'm cynical, but I believe if the options are "pay an extra-ordinate rate" or "potentially freeze to death" then the system itself is broken.
[1] https://www.texastribune.org/2021/02/20/texas-power-grid-win.... [2] https://www.houstonchronicle.com/business/article/jerry-jone...
>thousands of dollars
People are already receiving such bills:
https://www.forbes.com/sites/jonathanponciano/2021/02/20/170...
Two problems:
1. Most consumers who signed up for such plans had no awareness of the risk they were taking. Sales people would have tried to hide it.
2. Many such bills will prove uncollectible, bankrupting the middlemen involved.
A bailout is surely coming:
https://www.dallasnews.com/business/2021/02/20/griddy-custom....
People are already receiving such bills:
https://www.forbes.com/sites/jonathanponciano/2021/02/20/170...
Two problems:
1. Most consumers who signed up for such plans had no awareness of the risk they were taking. Sales people would have tried to hide it.
2. Many such bills will prove uncollectible, bankrupting the middlemen involved.
A bailout is surely coming:
https://www.dallasnews.com/business/2021/02/20/griddy-custom....
They were warned about basically everything that happened this time around in.. 2011. Ten years. There was plenty of time for the market to fix this, and nothing was changed.
You can't generate revenue if you don't provide a service:
> El Paso Electric said they always try to prepare for the future and after a winter storm in 2011, the utility company worked towards replacing and upgrading their equipment. Many generators now have antifreeze protection.
* https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing...
A little forward planning allows your business to keep on chugging in the face of (foreseeable) challenges.
> El Paso Electric said they always try to prepare for the future and after a winter storm in 2011, the utility company worked towards replacing and upgrading their equipment. Many generators now have antifreeze protection.
* https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing...
A little forward planning allows your business to keep on chugging in the face of (foreseeable) challenges.
Below 59 and the state’s electrical system would face cascading blackouts that would take weeks or months to restore.
Is the tolerance really this small? Afaict, in Germany this point is only reached at a -2.5 Hz deviation from the regular 50 Hz. At the -1 Hz point noted in the article, we start dropping large commercial loads from the grid. IANAEE.
Is the tolerance really this small? Afaict, in Germany this point is only reached at a -2.5 Hz deviation from the regular 50 Hz. At the -1 Hz point noted in the article, we start dropping large commercial loads from the grid. IANAEE.
Related article with a good discussion on capacity versus delivery pricing in the Texas energy market.
https://news.ycombinator.com/item?id=26207591
https://news.ycombinator.com/item?id=26207591