>The problem here as I understand it is that ERCOT stepped in and artificially set an absurdly high wholesale price
Incorrect. ERCOT set a price ceiling, not a price. The wholesale price without the ERCOT price ceiling would have been far, far higher than $9000 kwh. That ERCOT is at blame for the price ceiling is absurd.
* ERCOT is to blame for a lot of other things though.
A) There are actually 2 price ceilings. The $9000/MWh is the "high" cap. The situation lasted for long enough that they were supposed to switch to the "low" cap of (the greater of) $2,000/MWh or 50x the natural gas price index. Due to the also high price of natural gas during the crisis, this "low" cap ended up being higher then the "high" cap.
B) To protect the grid at a techincal level, portions of it were disconnected (load shedding). The result is that the "market" value within the grid that remained connected actually did drop below the cap. Since this only happened because supply was so low that some consumers couldn't buy at any price, the decision was made to set the price to the cap to better reflect the full demand instead of just the demand that was still connected.
> “Because energy prices should reflect scarcity of the supply, the market price for the energy needed to serve load being shed in the face of scarcity should also be at its highest,” the PUC’s news release stated.
> The PUC added, “The decision was spurred by ERCOT’s discovery that energy prices across the system were clearing at less than the current system-wide offer cap of $9,000 established by Commission rule.”
> In addition, the PUC ordered wholesale prices be backdated to February 15 when the storm escalated circumstances in the state.
I don't blame them for doing whatever it took to attract electricity generation onto the grid. But passing the costs directly to customers seems like the wrong way to handle that side of the transaction. I think the difference should have been paid for as part of the overall relief package.
I think the point is that no price would have made any extra electricity supply available. All this $9000 imaginary price did was provide the remaining generators with an extra $8000/MWh and causing a number of electricity wholesale buyers (far from only Griddy) to default.
It's not like any generator is making money having a power plant sit idle, they are losing tons. Any positive price is incentive enough, but no level of price can make whatever is causing the outage to be fixed in 4 days. The Texas grid is an entirely isolated system.
Wikipedia disagrees with you: “On February 15, during the power crisis, the state's Public Utility Commission required ERCOT to set the price to the $9,000 maximum. The commission reasoned that the trading prices for energy (as low as $1,200) were inconsistent with the supply scarcity.”
It links to source material that mostly reads as gibberish to me but does seem to make clear near the start that PUCT/ERCOT have the power to change the price and were unhappy that it was lower than $9000.
Out of curiosity can you point me to where that's stated in plain English by the parties involved (if there is such a place)? I must have bad info/assumptions
> ERCOT has informed the Commission that energy prices across the system are clearing at less than $9,000, which is the current system-wide offer cap pursuant to 16 TAC §25.505(g)(6)(B)... The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market... the market price for the energy needed to serve that load should... be at its highest.
It’s not exactly plain English, but the Public Utilities Commission is pretty clearly telling ERCOT that they should ignore the current clearing rates and raise prices until there’s enough power or they hit the $9,000 ceiling, whichever comes first.
Incorrect. ERCOT set a price ceiling, not a price. The wholesale price without the ERCOT price ceiling would have been far, far higher than $9000 kwh. That ERCOT is at blame for the price ceiling is absurd.
* ERCOT is to blame for a lot of other things though.