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The grid failure in Texas was a market failure

NWRatCon

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The failure of the power grid in Texas is the result of a long-term failure of imagination, and the inability to understand how markets work - and don't. ERCOT, the "Electric Reliability Council of Texas" (oh, the irony, it burns!), "manages" the electric grid for 90% of Texans (75% of its land area) and operates free of federal oversight. As their own website puts it "Founded in 1970, ERCOT is an independent, not-for-profit organization responsible for overseeing the reliable and safe transmission of electricity over the power grid serving most of Texas. As the Independent System Operator (ISO) since 1996, ERCOT has been the broker between competitive wholesale power buyers and sellers. The ERCOT ISO also provided the platform upon which Texas' electric utility industry made the transition to retail competition on Jan. 1, 2002." (Given their own press, they failed.)

And therein lies the problem: ERCOT sees itself not as a producer, but as a broker. "This isn't the state's first rodeo with widespread blackouts amid unseasonable cold, however. The Texas power grid is designed to independently manage hot summers, not really cold winters. But "what has sent Texas reeling is not an engineering problem," Will Englund reports at The Washington Post. "It is a financial structure for power generation that offers no incentives to power plant operators to prepare for winter. In the name of deregulation and free markets, critics say, Texas has created an electric grid that puts an emphasis on cheap prices over reliable service." The architect of Texas' electricity market says it's working as planned. Critics compare it to late Soviet Russia. (The Week)

That dichotomy of views encapsulates what is wrong in Texas, and why The parts of Texas not on its ERCOT power grid appear to have weathered the freeze with few outages (The Week).
After the 2011 winter freeze, El Paso Electric, on the Western Interconnect grid, spent heavily to "winterize our equipment and facilities so they could stand minus-10 degree weather for a sustained period of time," Eddie Gutierrez, an El Paso Electric spokesman, told KHOU. So this year, "we had about three thousand people that were out during this period, a thousand of them had outages that were less than five minutes."
"Weatherizing power generation and extraction equipment is voluntary in Texas". Because of that, producers have "deferred" maintenance/upgrades in favor of more profitability, and the State has encouraged such behavior.
"For years, energy experts argued that the way Texas runs its electricity system invited a systematic failure," The New York Times elaborates. "In the mid-1990s, the state decided against paying power producers to hold reserves, discarding the common practice across the United States and Canada of requiring a supply buffer of at least 15 percent beyond a typical day's need." Instead, Texas gas-powered plants rely on steady flow from in-state natural gas pipelines.

What's worse, they have refused to see the problem. "William Hogan, the Harvard global energy policy professor who designed the system Texas adopted seven years ago, disagreed, arguing that the state's energy market has functioned as designed. Higher electricity demand leads to higher prices, forcing consumers to cut back on energy use while encouraging power plants to increase their output of electricity. "It's not convenient," Hogan told the Times. "It's not nice. It's necessary."

Texas consumers disagree.
 
It's going to anger the people so much that they will remember it as a good reason for another attempted revolution, led by Trump or more likely somebody else.

These things just keep happening in America!

Which category does this one fit under, that has made America 17th. in quality of life?


  • A good job market
  • Affordability
  • Economic stability
  • Family friendly
  • Income equality
  • Politically stable
  • Safety
  • Well-developed public health system
  • Well-developed public education system


Income inequality and safety?
 
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I believe there is a middle ground. There are some tremendous advantages to a de-regulated marketplace-driven energy market. I cannot tell you how often I've wished to have the flexibility to choose supply the way Texans have been able to. Imagine being able to select your power company based on who provides the best deal for you. Interested in renewables? No need for regulation--sign up with a power company that provides clean energy and you're set. Compared to virtually all other localities where the power utility has a local monopoly (in CA? you're PGE or SCE. In MI? You're DTE. etc.) this flexibility has some real advantages.

I not only wouldn't advocate for Texans to lose that flexibility wholesale, I would like to see the rest of the country adopt some measure of it. Those of us working in this space (specifically renewables!) have long looked to the Texas model as a really interesting one for fast-tracking adoption of emerging energy sources.

The problem is the *lack* of regulation. Energy should be like pharmaceuticals. You have the freedom to choose which drug to take, or choose none at all, but the government is working behind the scenes to make sure no one sells you a drug that will kill you. I'd like to see the U.S. grid overall adopt Texas's market driven structure as a benefit to consumer choice, and I'd like to see Texas to adopt "FDA-level" oversight of the grid to make sure that free market doesn't sell Texans goods that might get them killed the next time a cold snap hits.
 
I believe there is a middle ground. There are some tremendous advantages to a de-regulated marketplace-driven energy market. I cannot tell you how often I've wished to have the flexibility to choose supply the way Texans have been able to. Imagine being able to select your power company based on who provides the best deal for you. Interested in renewables? No need for regulation--sign up with a power company that provides clean energy and you're set. Compared to virtually all other localities where the power utility has a local monopoly (in CA? you're PGE or SCE. In MI? You're DTE. etc.) this flexibility has some real advantages.

I not only wouldn't advocate for Texans to lose that flexibility wholesale, I would like to see the rest of the country adopt some measure of it. Those of us working in this space (specifically renewables!) have long looked to the Texas model as a really interesting one for fast-tracking adoption of emerging energy sources.

The problem is the *lack* of regulation. Energy should be like pharmaceuticals. You have the freedom to choose which drug to take, or choose none at all, but the government is working behind the scenes to make sure no one sells you a drug that will kill you. I'd like to see the U.S. grid overall adopt Texas's market driven structure as a benefit to consumer choice, and I'd like to see Texas to adopt "FDA-level" oversight of the grid to make sure that free market doesn't sell Texans goods that might get them killed the next time a cold snap hits.
Well yeah, the people who are freezing in Texas surely do have the flexibility to choose another supplier of power!

Maybe instead of answering me you would have been better off to just not get yourself confused?
 
Well yeah, the people who are freezing in Texas surely do have the flexibility to choose another supplier of power!

Maybe instead of answering me you would have been better off to just not get yourself confused?

Yikes. Well, that went right over your head.
 
Lessons learned, from three days in the cold and dark.
Find a way to operate the gas furnace from the generator, (It does not like an extension cord)
Keep a deep cycle battery and inverter handy and charged up.
The next gas grill, needs a side burner.
 
Lessons learned, from three days in the cold and dark.
Find a way to operate the gas furnace from the generator, (It does not like an extension cord)
Keep a deep cycle battery and inverter handy and charged up.
The next gas grill, needs a side burner.
I hope you're safe and warm longview. Keep us posted.
 
Lessons learned, from three days in the cold and dark.
Find a way to operate the gas furnace from the generator, (It does not like an extension cord)
Keep a deep cycle battery and inverter handy and charged up.
The next gas grill, needs a side burner.
You be careful, several deaths from Carbon monoxide has occured in Scandinavia while using a generator to warm the house. You don't smell or feel anything. You just fall asleep.
 
The failure of the power grid in Texas is the result of a long-term failure of imagination, and the inability to understand how markets work - and don't. ERCOT, the "Electric Reliability Council of Texas" (oh, the irony, it burns!), "manages" the electric grid for 90% of Texans (75% of its land area) and operates free of federal oversight. As their own website puts it "Founded in 1970, ERCOT is an independent, not-for-profit organization responsible for overseeing the reliable and safe transmission of electricity over the power grid serving most of Texas. As the Independent System Operator (ISO) since 1996, ERCOT has been the broker between competitive wholesale power buyers and sellers. The ERCOT ISO also provided the platform upon which Texas' electric utility industry made the transition to retail competition on Jan. 1, 2002." (Given their own press, they failed.)

And therein lies the problem: ERCOT sees itself not as a producer, but as a broker. "This isn't the state's first rodeo with widespread blackouts amid unseasonable cold, however. The Texas power grid is designed to independently manage hot summers, not really cold winters. But "what has sent Texas reeling is not an engineering problem," Will Englund reports at The Washington Post. "It is a financial structure for power generation that offers no incentives to power plant operators to prepare for winter. In the name of deregulation and free markets, critics say, Texas has created an electric grid that puts an emphasis on cheap prices over reliable service." The architect of Texas' electricity market says it's working as planned. Critics compare it to late Soviet Russia. (The Week)

That dichotomy of views encapsulates what is wrong in Texas, and why The parts of Texas not on its ERCOT power grid appear to have weathered the freeze with few outages (The Week). "Weatherizing power generation and extraction equipment is voluntary in Texas". Because of that, producers have "deferred" maintenance/upgrades in favor of more profitability, and the State has encouraged such behavior.

What's worse, they have refused to see the problem. "William Hogan, the Harvard global energy policy professor who designed the system Texas adopted seven years ago, disagreed, arguing that the state's energy market has functioned as designed. Higher electricity demand leads to higher prices, forcing consumers to cut back on energy use while encouraging power plants to increase their output of electricity. "It's not convenient," Hogan told the Times. "It's not nice. It's necessary."

Texas consumers disagree.


2003 Northeast power outage.. I rest my case.
 
Maybe instead of answering me you would have been better off to just not get yourself confused?
What a way for you to completely dodge and miss the point.

He did answer you, and more thoroughly than anyone else in this forum. use your head!

Well yeah, the people who are freezing in Texas surely do have the flexibility to choose another supplier of power!

and I'm going to have to ask you to stop using fellow texans, many of whom are religious conservative christians, who your side has demonized as fundamentalist nazis the last 4 years, as political shields. Stop robbing them of their agency. If you truly care about texans, you would have given to them when they were telling your side what they needed the last 30 years. But you didn't give a shit about them, and still don't. You just want to blame republicans because that's far easier than actually thinking about nuance and coming to a correct position, and if you got to use real people in real struggles as your weapon, you're going to do it. The shame.
 
Texas consumers got exactly what they paid for.
And voted for.

Works great and cheap, 99% of the time.
Fails 1% of the time.

The question is, which costs more overall.
 
If I lived in Texas, I would build a bermed home there. A bermed home will never get below 57 deg F (assuming it's closed up, and insulated well). Cool, but manageable, and no frozen water pipes. A bermed home will also stay cooler in the summer, and require less A/C to cool.
 
Apparently it could have been worse


Something is seriously wrong, I agree with NWRatCon. But what that is and if the problem was a market faliure, I don't know. I haven't got a clue on how Texas electricity supply looks like.
 
You be careful, several deaths from Carbon monoxide has occured in Scandinavia while using a generator to warm the house. You don't smell or feel anything. You just fall asleep.
Thanks, I keep the generator about 60 feet from the house.
 
For those who think the effects of this will end in a few weeks...

Griddy, however, is in a different position. Its service is simple -- and controversial. Members pay a $9.99 monthly fee and then pay the cost of spot power traded on Texas’s power grid based on the time of day they use it. Earlier this month, that meant customers were saving money -- and at times even getting paid -- to use electricity at night. But in recent days, the cost of their power has soared from about 5 to 6 cents a kilowatt-hour to $1 or more. That’s when Fallquist knew it was time to urge his customers to leave.

“I can tell you it was probably one of the hardest decisions we’ve ever made,” he said. “Nobody ever wants to see customers go.”

Griddy isn’t the only one out there actively encouraging its customers to leave. People were posting similar pleas on Twitter over the holiday weekend from other Texas retail power providers offering everything from $100 rebates to waived cancellation fees as incentives to switch.

Customers may not even be able to switch. Rizwan Nabi, president of energy consultancy Riz Energy in Houston, said several power providers in Texas have told him they aren’t accepting new customers due to this week’s volatile prices.

Hector Torres, an energy trader in Texas, who is a Griddy customer himself, said he tried to switch services over the long weekend but couldn’t find a company willing to take him until Wednesday, when the weather is forecast to turn warmer.

“I’ll find out in the next week if I’m getting a huge bill,” he said.


 
Texas consumers got exactly what they paid for.
And voted for.

Works great and cheap, 99% of the time.
Fails 1% of the time.

The question is, which costs more overall.
This is pretty much it, risk management calculations are well known and used by places like insurance companies, disaster recovery firms, data management, etc.

If one's goal is higher reliability, then pay for it, if not, then accept the downside.

None of this is a mystery.
 
For those who think the effects of this will end in a few weeks...

Griddy, however, is in a different position. Its service is simple -- and controversial. Members pay a $9.99 monthly fee and then pay the cost of spot power traded on Texas’s power grid based on the time of day they use it. Earlier this month, that meant customers were saving money -- and at times even getting paid -- to use electricity at night. But in recent days, the cost of their power has soared from about 5 to 6 cents a kilowatt-hour to $1 or more. That’s when Fallquist knew it was time to urge his customers to leave.

“I can tell you it was probably one of the hardest decisions we’ve ever made,” he said. “Nobody ever wants to see customers go.”

Griddy isn’t the only one out there actively encouraging its customers to leave. People were posting similar pleas on Twitter over the holiday weekend from other Texas retail power providers offering everything from $100 rebates to waived cancellation fees as incentives to switch.

Customers may not even be able to switch. Rizwan Nabi, president of energy consultancy Riz Energy in Houston, said several power providers in Texas have told him they aren’t accepting new customers due to this week’s volatile prices.

Hector Torres, an energy trader in Texas, who is a Griddy customer himself, said he tried to switch services over the long weekend but couldn’t find a company willing to take him until Wednesday, when the weather is forecast to turn warmer.

“I’ll find out in the next week if I’m getting a huge bill,” he said.


That is related to a particular energy plan that several companies offered, to buy electricity at the spot wholesale rate,
it is a great price most of the time, but has nearly unlimited liability.
IMOHO,It is far safer to get a fixed rate plan, and let the electric provider take that liability.
 
This is pretty much it, risk management calculations are well known and used by places like insurance companies, disaster recovery firms, data management, etc.

If one's goal is higher reliability, then pay for it, if not, then accept the downside.

None of this is a mystery.
I think many of the people who were sold on the plans, did not understand the amount of exposure to high bills they had.
 
That is related to a particular energy plan that several companies offered, to buy electricity at the spot wholesale rate,
it is a great price most of the time, but has nearly unlimited liability.
IMOHO,It is far safer to get a fixed rate plan, and let the electric provider take that liability.

Yes, but the state allows the plan to be sold... Essentially day trading your electric rate... No way in hell I would sign up for a plan like that..
 
I think many of the people who were sold on the plans, did not understand the amount of exposure to high bills they had.
That is part of the calculation though, if an event is rare but costly, then you try to average out a yearly cost to get a better perspective on the real costs, but its even more painful if it hits all at once.

Also, on average people are very stupid when it comes to theoretical risk (and conversely tend to overly worry about more concrete types of risk) this is an inherent and well documented cognitive bias and an example of why complex societies need experts.
 
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