The grid failure in Texas was a market failure

[diz]

Which is an unfair assessment. The Texas electric providers now have to compete with each other for customers and Americans typically want cheap prices. So it's not just saying corporate greed, but cheap Americans. In some cases, you get what you pay for and that may forgo winterization which winter storms of this magnitude are very rare.

Yeah, this is the part people on the modern left seem totally oblivious to. Greedy capitalists are happy to sell whatever the customer is willing to buy. You want to pay lots of extra dollars for electricity to avoid blackouts...you can!

Their heroes Marx and Lenin got this: 'The Capitalists will sell us the rope with which we will hang them.’ etc etc.

 

[Phys251]

And to think there have been people attributing this TX issue to lack of interconnections.

Except that's exactly what went wrong in Texas. Power imbalances occur frequently, but in 47 out of the Lower 48 states, supply shortages in one area can be made up for with supply excesses in another. That's why Oklahoma had far fewer problems despite going through this exact same winter storm.

Interconnections help fix some problems, interconnections cause other problems.

Yes. That is an active area of research right now. But it would be naive to conclude from this that interconnections are no better than they are worse, when circumstances have shown that this simply isn't true.

 

[diz]

Except that's exactly what went wrong in Texas. Power imbalances occur frequently, but in 47 out of the Lower 48 states, supply shortages in one area can be made up for with supply excesses in another. That's why Oklahoma had far fewer problems despite going through this exact same winter storm.

Yes. That is an active area of research right now. But it would be naive to conclude from this that interconnections are no better than they are worse, when circumstances have shown that this simply isn't true.

Yeah, ERCOT has interconnections.

So, yeah.

World is more complicated than “interconnections solve everything."

 

[Phys251]

Yeah, ERCOT has interconnections.

So, yeah.

World is more complicated than “interconnections solve everything."

Yes. Is there anything else you'd like to laysplain to me?

 

[NWRatCon]

I think we can all agree that what happened in Texas was disasterous. I completely agree that

Effective mitigation is I suspect more cost effective than outright prevention of low probability events.

Unfortunately, ERCOT did neither. That was by design. Which was the point of the OP. I'm amused that with your expertise you know so little about ERCOT. They call themselves brokers. "Reliability" is in the name, and what they don't deliver.

And, while you are correct in many of the generalities, what you've left out of your analysis is exactly what is wrong with it. I suspect that is the result of a large degree of the political predilection you accuse others of. To wit:

But then it wouldn’t be entirely surprising if there were a politicized irrational response from politicians. Been known to happen. Politicians are generally better at throwing buckets of money or regulations at the thing that caused the last problem than ensuring a system is efficient with respect to dealing with the many possible things that could cause the next one.

Here's the thing: ERCOT is a creation of ideological political forces, and its faults are inherent thereto. Yes, energy is a highly regulated industry in general, but not in Texas, and not in a lot of the particulars which caused the failures here.

What ERCOT didn't do is exactly what you suggest: "ensuring a system is efficient with respect to dealing with the many possible things that could cause the next one." In nearly every other area of the country utilities are required to maintain reserves of 15% excess capacity, but not in Texas. In most jurisdictions mitigation measures are mandatory, but not in Texas. In most jurisdictions planning revolves around contingency operations (e.g., rolling blackouts), but not under the Texas regime. Yes, utility functions have been decoupled under the ERCOT paradigm, but the individual functionalities have been allowed to become uncoordinated, and that is by design. Deregulation does not require complete abandonment of the field, but is epitomized by the "hands off" approach Texas politicians have taken. That's why this thread is in this particular forum, and the point of the OP.

I'm in favor of minimal regulation whenever possible (I spent a good chunk of my career on the regulator side of "regulated industries"), but ERCOT quite obviously has gone too far, and done too little (on purpose). The proof is the contrasting results in eastern edge and western edge Texas - the 10% not covered by ERCOT - that did not suffer catastrophic failures. Yes, integrating power grids brings on certain complications, as the 2003 blackout demonstrated, but it also creates resiliency. That is where the ERCOT paradigm has failed, and has failed repeatedly. They refuse to learn from their mistakes and adjust. That's why I said it is a market failure to begin with. The solution isn't in "the market", it's in appropriate regulation. On this I think we agree.

 

[Peter]

Other countries manage much larger swings in temperature without going into utter meltdown.

It must be magic.

 

[diz]

Here's the thing: ERCOT is a creation of ideological political forces

ERCOT is a creation of government, so to the extent government in a democracy is driven by political forces then, well, duh.

What you appear to be underestimating is that there are a lot of professional people who do this stuff for a living who also contributed to the system design. People who do this stuff for a living recognize a few things: 1) there is not an infinite amount of money; 2) it is not worth spending to 100% reliability - it makes people worse off. As far as what is worth spending money on in a complex system like an electric grid subject to real world natural variation, reasonable, knowledgeable, non-ideological people can and do disagree.

Your average politician understand there will be scapegoating and wringing of hands from people who have no idea what they are talking about when there are blackouts. (See, TX February 2021) They also know the average person gets used to paying a few cents per kWh on his electric bill and has no clue where it comes from. This is why many people who actually do this stuff for a living accept there is a huge tendency to overinvest in “reliability” in an electoral democracy.

This article, (timed right before the TX blackouts when such things were safer to say I imagine) captures what I’m saying pretty well:

There’s an old saying in the electricity industry, “Reliability is the last refuge of scoundrels.” Whenever a utility wants to charge customers for an extra power plant or to keep a poor investment running, they’re likely to argue it’s needed for reliability. It’s an effective argument: reliable electricity is a motherhood-and-apple-pie issue, but technical enough that it’s difficult to challenge utility claims. Politicians have incentive to look the other way—higher electricity bills might make for a few uncomfortable town hall meetings, but blackouts can end careers.

A Hopeful Sign for PJM Capacity Reform

PJM Interconnection announced it will undertake a comprehensive review of its capacity market.

www.nrdc.org

If you read that article and the link they have to the analysis of capacity markets costing ratepayers billions and come away thinking they are all about ideology while you and others in this thread squealing about “deregulation” are untainted by ideology you may need some recalibration.

 

[NWRatCon]

ERCOT is a creation of government, so to the extent government in a democracy is driven by political forces then, well, duh.

What you appear to be underestimating is that there are a lot of professional people who do this stuff for a living who also contributed to the system design. People who do this stuff for a living recognize a few things: 1) there is not an infinite amount of money; 2) it is not worth spending to 100% reliability - it makes people worse off. As far as what is worth spending money on in a complex system like an electric grid subject to real world natural variation, reasonable, knowledgeable, non-ideological people can and do disagree.

Your average politician understand there will be scapegoating and wringing of hands from people who have no idea what they are talking about when there are blackouts. (See, TX February 2021) They also know the average person gets used to paying a few cents per kWh on his electric bill and has no clue where it comes from. This is why many people who actually do this stuff for a living accept there is a huge tendency to overinvest in “reliability” in an electoral democracy.

This article, (timed right before the TX blackouts when such things were safer to say I imagine) captures what I’m saying pretty well:*

If you read that article and the link they have to the analysis of capacity markets costing ratepayers billions and come away thinking they are all about ideology while you and others in this thread squealing about “deregulation” are untainted by ideology you may need some recalibration.

Interesting that absolutely nothing in that article conflicts with anything that I have posted. Nor have you contradicted anything I've posted. Nor have I advocated for 100 reliability, as you implied. My point, from the outset, is that Texas has set up a system that is unreliable and inadequately supervised, and that has proved inflexible and resistant to improvements. Why is that? They have approached this exactly the opposite of the PJM analysts.

What I, and some other posters, have noted is that there is a trade off between reliability and cost. At every such intersection, ERCOT has opted for cost savings and profitability of providers over reliability of infrastructure, and has incentivized offloading of risk to consumers. That's a market-influenced analysis favoring providers over consumers. I'm not saying it is unique, although it is extreme in Texas's case. That is the point of the OP. It's a market failure as much as, or more than, a systems failure, because it has prioritized marketing over objective analysis of system needs.

Did the system fail under ERCOT? (Remember the R is for "reliability") - especially in light of its 2011 experience? Could that failure have been prevented? How? Why did ERCOT fail when adjacent systems, facing identical conditions, did not? What were the recommendations of those professionals you tout? Were they ignored?

 

[HangLow]

We could start by requiring the ERCOT board to actually live in Texas.

A third of the ERCOT board members live out of state

State officials confirmed that they pulled down the photos and biographies of ERCOT board members from the website due to possible safety threats.

www.wfaa.com

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[ataraxia]

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.

Interesting analogy you raise there to pharmaceuticals- another great example of the failure of unregulated free markets.

Republicans successfully lobbied to deregulate the over-the-counter (OTC) medicines, and removed FDA oversight and regulation for this category. The result was not the market forces eliminating all fake drugs and false advertisement. Quite the reverse. The result is that there is now absolutely no accountability for the claims of OTC makers, nor for their claims. What is in the bottle and what is labelled on the bottle can be entirely different things.

Can you imagine if we removed such regulations on prescription medicines? I have had liberterians here tell me they are sure that an unregulated prescription drug market would self-correct and do better than with government regulations. I asked them how someone with an acute heart attack, semi-comatose and struggling to breathe while being wheeled in to the ER at 3 am, could be expected to look through a catalog of various brands of beta-blockers for their heart attack and choose which one was a good brand.

It just doesn't make sense. But they have this magical faith in the free market. And then they point to Cuba or Venezuela and ask if I want us to become communists like them. Unbelievable.

 

[NWRatCon]

In my last post on this thread I asked these questions: Did the system fail under ERCOT? (Remember the R is for "reliability") - especially in light of its 2011 experience? Could that failure have been prevented? How? Why did ERCOT fail when adjacent systems, facing identical conditions, did not? What were the recommendations of those professionals you tout? Were they ignored?

I find it interesting, but not even a little surprising, that in the intervening three weeks no one could defend their positions with regard to those questions. I will provide my answers to those questions:
1) Yes, the system clearly failed (and continues to fail).
2) The 2011 experience provided a warning and a blueprint to prevent a future catastrophe.
3) The 2021 failure could have been prevented in the same way that El Paso avoided it.
4) By winterizing the critical infrastructure, as adjacent providers did.
5) The studies recommended winterization, which ERCOT merely "suggested" to providers.
6) All recommendations (and suggestions) were ignored.

 

[highroller]

Market don’t fail. Only people can fail the market. /s

 

[HangLow]

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