So, a thing I've been thinking of is that... because most people are on constant rate plans (where there isn't any incentive to cut back during a supply and/or demand crunch), the overall grid demand is a lot more inelastic than it would be if everyone where on a Griddy-like service.
When, say, 75% of demand is insensitive to price signals, to get the 25% of demand that is sensitive to respond takes a MUCH bigger pricing signal to have the same demand reduction than if 100% of demand was responsive to demand signal.
What's needed is, say, a guarantee of 25-50% of average consumption (or maybe enough for certain essentials) being charged at the base rate while the all the rest for everyone is charged at some multiple of the wholesale rate. But this only would work well if everyone had smart thermostats on their heat, their hot water, their airconditioners, and all other major power consumption sources. Otherwise people would be unaware of this pricing signal until the next month.
Also, maybe it'd be a good idea to have the main thermostat in the house (talking to the meter) show some estimate of the daily energy cost so people don't have to wait a month to find out they're using an insane amount of electricity somewhere.
Pricing signals work great (including for consumers) if supply/demand is elastic. If it's inelastic, it ends up looking like profiteering and passes on huge risks to those often least able to take them.
I think you’re missing the wood for the trees a bit here. Firstly, the scale of the incident in TX went for beyond what could be handled by demand management through price controls anyway- most of the supply isn’t designed to handle those temperatures. No rate was going to increase supply (which is obviously half of the equation). On the demand side it’s a much more complex question than demand being inelastic. No matter what the price Ted Cruz was going to continue to heat his hot tub (in case he wanted a dip once he’d flown back from Cancun) whilst those who are in poverty are likely to have ended up unable to hear their homes simply because they couldn’t afford the price. And that’s the problem with using price- there is a minimum amount of electricity people need, and some people won’t be able to afford that minimum before others even think about turning off the flood lights on their tennis court.
Essentially the effect of what you’re saying is poor people would be priced out of an essential utility to ensure rich people get a stable supply.
>Essentially the effect of what you’re saying is poor people would be priced out of an essential utility to ensure rich people get a stable supply.
No, that's not the case. The entire point of a market system is to encourage people to use the limited resources on the most critical needs first. However, since there is a fixed rate culture the end result is that everyone wastes energy on non essential needs.
There simply aren't enough rich people on the planet to steal all the 75GW and even if they did they would be broke in the end. I don't know where you got that idea. The rich are in the minority. Also, you're forgetting that rich people will waste more energy if their rates are artificially kept lower.
Besides that, supply IS elastic in the longer term. So if the rich were able to bid the price up, there would be folks able to make a bunch of money selling power to them, reducing the cost. And that opportunity should be available to most people. If we had standardized feed-in capability on smart meters, whole house generators, solar roofs and batteries, or even cars could sell electricity on the grid when the wholesale price got insane.
Poor folks would be insulated from the large swings in price by the 25-50% guaranteed price portion of the power supply. (And you could make the price guarantee portion progressive by making it a constant 3kW (averaged over an hour) or whatever regardless of house size, so smaller houses would have much more of their electricity at a fixed rate than larger houses.)
there are stories of many empty office buildings fully powered with the lights on throughout the whole thing. Its possible if they were on a more price sensitive system those commercial property owners would have opted to shut off more of the power.
In Austin's cade, Austin Energy built out way too much off of essential circuits. Office buildings stayed lit because they trunked off a circuit feeding medical centers, emergency services, that type of thing.
So the only place Austin Energy could go for load shedding was their residential customer base. Even then; they didn't execute true "rolling" blackouts, because that implies dividing the supply of power you have somewhat evenly across your entire customer population in a reasonable time based multiplexing scheme so that everyone gets their chance to run the heat. To minimize the amount of time people go without any heat, and at regular intervals so people can plan their consumption.
Can't speak for other metroplexes, and the co-op I get power from did a perfect job.
If they were (and knew they were) being charged $9/kWh for days on end, the occupants of those buildings would have shed the wasteful lighting loads for you.
Residential areas should maybe be the ONLY places where a fixed rate would be allowed. Everywhere else (commercial, industrial, etc) should have to have real-time pricing. That would reduce the swings in price since demand would be much more elastic.
This would have the potential for nice second-order effects.
I'm thinking about places in AZ/NV where some companies and even some municipality groups (i.e. bureaucratic/permitting type) have moved towards four 10 hour days instead of five 8 hour days.
This is a bit better for those employees QOL (since they get 3 day weekends all the time) and also benefited the employers since they could lower their power consumption for an additional day.
Or could cause a clawback of some of those by companies realizing that if they went back to 5x8, one of their days would be cheaper power because the 4x10 companies wouldn’t be operating on one of those days.
Or “if we took Wednesdays off instead of Fridays, we’d benefit from Friday power being cheaper than Wednesday power”.
I still think market-aware power metering is a good thing for large users.
Well, you’re making my point for me! With better control and response over energy usage, the power companies would be able to cut power to non-essentials, and businesses would be both incentivized and empowered to do it themselves voluntarily.
Yeah, calling them “rolling” was a complete joke. Many people in Austin (like me) lost power for a solid 3 days, while low-rise, wealthy Westlake was almost entirely untouched.
If you had told people in Texas that it’s going to cost $200 per hour to run their heat, people would have responded by dramatically cutting consumption and the blackouts would not have been required.
Now that said, having an electric system where this is necessary is itself a market failure.
Either people still got hit by massive bills (thousands or tens of thousands of dollars), or they cut usage (voluntarily or otherwise) and froze to death or poisoned themselves trying not to.
Municipal water and sewerage perations couldn't function. Pipes froze and burst. Massive damage precipitated by underprovisioning, risk-shifting to the most vulnerable, and a gamble that lost.
Pricing of electricity is confusing and very varried. Usually it’s business that pay the variable rates.
I worked at a power monitoring startup. We looked at states that had peak demand and tried to estimate commercial electricity bills and sent alerts if a business was close to its peak usage.
“ Some utilities will charge customers based on their individual peak demand. The highest demand during each month or even a single 15 to 30 minute period of highest use in the previous year may be used to calculate charges”
People have enough shit to be worried about than to worry about their power ticker going up and down. This is not something we should add as a burden to our citizens.
Next I'm going to hear people wanting to short electricity.
Exactly. Electricity should be something that just exists, as an ambiance around you. That you pay a predictable, modest monthly bill, and can than focus on other things. Who needs the drama of free markets there?
Also applies to net neutrality and health-care btw.
The electricity price is not low if you use it without consideration of cost. Why bother with LED lights, heat-pumps, or proper insulation if you’re totally insensitive to the cost of electricity?
What happens in such situations is electricity ends up being rationed with rolling blackouts. Or, if you manage to produce enough anyway by massive government investment, per capita energy usage skyrockets. The former situation happens in developing countries and the latter in oil-rich countries like Saudi Arabia which heavily subsidize electricity costs so it ends up being cheaper to just run the A/C at full blast constantly instead of properly insulating your household.
But most people don’t care about climate change, so maybe that’s the direction things would go.
A predictable price sufficient to meet netcosts of provisioning is not the same as "price spikes 10,000% under historically precedented but outside planning contingencies weather event.
Texas saw similar temps in late January, 2011, highs around 20°F, lows near zero. That was ten years ago. There weren't widespread outages.
I think it depends on how much it costs and the environmental impact of energy generation and transmission. There's a continuum between austerity taxing a resource for insane frugality, moderate pricing, and giving it away that has to be deliberately comsidered.
Moderate pricing is the right move. But a lot of folks are missing my main point here:
The more people and businesses are on fixed rates, the more inelastic demand is and therefore the more extreme the pricing swings are for those who are on moderate real-time pricing plans. We need to make real-time pricing as broad as possible so the price extremes are much smaller. and make it more feasible for small players (including middle class individuals) to contribute directly to supply.
Energy consumption for home use during a blizzard is very inelastic. Energy consumption for empty hotels and office buildings should be very elastic rather than sitting idle, lights on, and HVAC blasting. Nonessential businesses that consume large quantities of electricity should be cut first before residential areas.
Yes. If generated from renewable sources, power should have a reasonable cost so people aren't server bitcoin mining or indoor weed farming for pennies when power is a limited resource. Prices should be smoothed out and predictable to the customer.
I don't know. It seems there can be quite an effect by shifting usage even slightly as power generation has to be real-time and handling the peaks costs up all more.
Free-market pricing seems wrong, as would per-minute pricing, but something like a 3-window (on-peak, off-peak, standard) time-of-day rate seems more acceptable.
I mean, there is a valid point of reducing the mental load, but the alternative is paying significantly more for electricity (and producing more greenhouse gases). Particularly as we rely more and more on non-dispatchable renewable power sources.
'People' can simply choose a different electricity retailer if they want a constant rate and to not worry about this. If they were adequately informed about risks, why shouldn't we be allowed to choose our path? Industrial customers usually buy on the wholesale market, it doesn't seem a stretch that consumers could benefit from that too.
> If they were adequately informed about risks, why shouldn't we be allowed to choose our path?
That's a big if. In reality, they won't be adequately informed - they'll be at best adequately disinformed by the marketing departments of the power companies and third parties popping up around variable-pricing schemes. And to the extent exposing the customers to price variability is beneficial for the suppliers, the market has a nice way of removing the previously available options from the choice pool.
There's a spectrum between "let the people decide for themselves" and "the people will predictably decide to do something stupid and then they'll beg to be bailed out, so perhaps let's not offer that option", and I feel this may fall closer to that second end.
Because if you lose enough, you start dragging your family or community down. If enough people lose enough, they turn into a humanitarian crisis. People are social creatures, and want to help each other, and set up systems that do so - which then get unintentionally exploited by risk takers.
So a bunch of people do something obviously stupid - like getting scammed by a tech support call, or get infinite debt on a payday loan, or put a hand in a moving machinery and lose it. Now they're there, scammed, without money, and/or a hand. What are you going to do? Deny them healthcare and basic support? No, we help them anyway, and instead chase scammers, put limits on payday loans, and enforce safety requirements on equipment - we take away the choice of being stupid, because that's more reasonable than being indifferent to the suffering of victims of their own stupidity, for the sake of enforcing a corrective feedback loop.
People lose money in the stock market all the time. This feels similar to me--people bet on the market and were on the wrong side of the trade. I do have sympathy for people who are having financial trouble as a result of their decisions here, but there isn't serious talk about banning speculation on stock markets because some investors might make bad trades.
The trade you're making by being a Griddy customer has essentially unlimited downside risk though. Retail investors can make those types of trades in securities, but they are heavily regulated and it is made very clear just how risky they are. It's also possible for your broker to liquidate your positions very quickly if they margin call you, so they can protect themselves from that downside to an extent. Griddy can't cut off your power in an instant when the spot price jumps.
If a traditional electricity supplier tried to buy all their electricity daily at the spot price and not hedge against any risk, they would quickly go bust. So why is it sensible for consumers to be allowed to do that? Some businesses may buy their energy at wholesale prices through their supplier, say an aluminium smelting factory. But those businesses will have full time traders who are also buying insurance/derivatives to protect against volatility in the market. Consumers should insure themselves against that risk too, by using a more traditional energy supply contract.
> The people signing contracts to buy Texas electricity at wholesale prices were doing so to economize. In some theoretical sense they accepted higher price volatility in exchange for usually lower prices, but in a much more practical sense they wanted the usually lower prices and couldn’t afford the higher price volatility. And then when prices rose they were wiped out.
> But the Griddy stories suggest that there’s something to it. It turns out to be really easy to accidentally engage in risky financial speculation, to somehow make disastrous bets on spot power markets in your monthly utility bill because it’s simple to sign up. If life is a constant series of high-stakes financial gambles anyway, perhaps it is tempting to choose some of your gambles on purpose.
And it’s not about the “dumb poors” either. I’m a data scientist and and I signed up for a variable-rate plan like this when I used to live in Chicago. I watched my electricity consumption closely, and diligently reduced my consumption via home automation when I got alerts about price spikes. I thought it was great, and I saved money. (Charging the Tesla overnight was basically free.) I figured there might be periods where things were 2x or 3x more expensive than usual, and I could absorb such costs.
But I never in my wildest dreams imagined that rates would shoot to 100x normal values for days on end. The very claims of “it’s market driven!” made me think that was impossible - how could any efficient market sustain such prices?
The Internet, and tech in particular, has completely changed the business sphere by throwing out that whole "meeting of the minds" concept that was taken for necessary in any contractual relationship.
In the past, one could count on their hands and feet the number of contracts that one would enter into over one's life.
Now? There's so much churn that the act of accepting is more a ritual or formality. One that sadly has the capability to take advantage of a lot of people due to information asymmetry.
> In the past, one could count on their hands and feet the number of contracts that one would enter into over one's life.
More recently - and still IMO OK - maybe you entered into more than 20 contracts in your life, but you were unlikely to have 20 contracts ongoing simultaneously. Today? I don't even know how many contracts or pseudo-contracts I'm involved in, but its in dozens.
That's my biggest reason I started to avoid SaaS and subscriptions as much as I can. Because every service you subscribe to is a relationship you enter, that you now have to manage, keep in mind. These add up quickly.
We installed solar panels a few years ago. They take care of 100% of our electrical needs (and we live in Portland Oregon where it is cloudy 9 months out of the year). I haven’t had to pay more than $12/month, and that is the fee we are charged by PGE to be hooked into the grid so we can sell them our excess. One thing I’ve found out is that we no longer worry about electricity usage. I used to fret about lights being left on, but no longer. That doesn’t seem healthy, but when you are no longer worrying about paying for something you stop worrying about wasting it.
On the other hand, electricity pricing is a construct. To some extent it is designed so that you do worry and limit use of a shared resource.
I think other utilities like internet service adopt this construct, then monetize worry to get you to pay a little more for all-you-can-eat.
There's an interesting quote from a former chairman of the atomic energy commission:
It is not too much to expect that our children will enjoy in their homes electrical energy too cheap to meter, will know of great periodic regional famines in the world only as matters of history, will travel effortlessly over the seas and under them and through the air with a minimum of danger and at great speeds, and will experience a lifespan far longer than ours, as disease yields and man comes to understand what causes him to age
Can you imagine being that hopeful about the future, I know a lot of people are opting not to have children due to the environmental nightmare those children would have to survive.
That's more relative than absolute expectations, or maybe you just know a lot of neurotic people.
Even if climate change is as bad as WW2 (doubtful over the same time scale), people still had children then, and they still had children when every city was covered in a foot of horse poop, all your kids died at 14 and doctors didn't believe in handwashing. In fact they had more!
>... I haven’t had to pay more than $12/month, and that is the fee we are charged by PGE to be hooked into the grid so we can sell them our excess.
Wow. If you are only paying $12 a month for access to the grid, you are paying a small fraction of your share of the cost of maintaining the grid. These consumer solar subsidies are a massive subsidy from the poor to the wealthy and really aren't sustainable.
Net metering is a temporary state intended to build critical mass and get mass production going. Solar panel owners don't pay the full cost of grid services, and utilities are not paying them for the full value of the electricity fed back in.
Residential solar IMO is mal-investment because grid scale solar has better economies of scale. Solar plants are easier to maintain. The grid is not built for widespread net metering. Rooftop solar has more fatalities than nuclear because of installers falling off.
Hardly. My "access" bill is $20/mth, but my panels give $350/yr more to the grid than I use. PGE gives me like $30 of that back at the end of the year. So that $12 / $20 doesn't tell the whole story. They are also likely giving a lot more renewable energy to the grid that isn't compensated and is more like another $30/mth of cost.
>...but my panels give $350/yr more to the grid than I use.
You are likely confusing wholesale and retail prices of electricity. Even just considering solar, the cost for a utility to generate the power itself is likely between 2-4 cents per kilowatt. Most states require the utility to essentially pay the retail rate for electric power for any power generated by rooftop solar since it directly offsets the electrical usage. (Never mind that the electric power might have to be purchased when the utility doesn't want the power.)
Buffet has complained about how this issue:
>...His logic is simple, he wants to have to pay wholesale electricity rates for the energy generated by rooftop solar instead of the same price NV Energy is charging these customers since he says it will penalized customers without solar panels.
So unless you are using the wholesale price for the estimate for the value of the excess electricity generated, you are greatly overestimating its value.
Besides overpaying for the electricity generated by rooftop solar, your $20 access bill is another subsidy. One estimate is that the average yearly cost to maintain the grid is about $750 per customer.
>Wait, don't we want to penalize customers without solar panels?
Why do you say that? If the government wants to subsidize solar power, isn't it better to do it in a way that is safer, less expensive and the benefits are shared by all consumers?
What kind of lights do you have? As far as I know it takes a lot of LED lights before you have to care if you left them on or not, even if you left them on all year.
I think the only people who are interested in them are those with money worries. To a lot of us it's unneccessary IOT tat and just another surveillance device to be honest.
Another electricity billing method in the UK that may or may not be a novelty to Americans are pay-as-you-go meters, typically fitted in houses that have had problems paying their bills on a monthly basis.
The meter has a card reader built in and you buy the top ups from shops (anywhere I think - newsagents, gas stations). When you put the card in it, it tops up the balance, and when it hits 0 it cuts you off. This happens at random times if you forget to do it, you can just get plunged into darkness whenever. It's pretty dickensian shit and you don't hear as much about them these days, but I think lots of houses still have them fitted.
And Octopus (perhaps others, only I'm aware of) even offers an hourly tracker plan ('Agile'), with an API.
Also, due to Ofgem regulatory requirement all plans have a cap, so this couldn't happen. (It's not capped cheap of course, but it's not going to cost thousands/month. With Octopus specifically it translates to 35p/kWh cap on its variable rate plans, ~double recently typical prices.)
When, say, 75% of demand is insensitive to price signals, to get the 25% of demand that is sensitive to respond takes a MUCH bigger pricing signal to have the same demand reduction than if 100% of demand was responsive to demand signal.
What's needed is, say, a guarantee of 25-50% of average consumption (or maybe enough for certain essentials) being charged at the base rate while the all the rest for everyone is charged at some multiple of the wholesale rate. But this only would work well if everyone had smart thermostats on their heat, their hot water, their airconditioners, and all other major power consumption sources. Otherwise people would be unaware of this pricing signal until the next month.
Also, maybe it'd be a good idea to have the main thermostat in the house (talking to the meter) show some estimate of the daily energy cost so people don't have to wait a month to find out they're using an insane amount of electricity somewhere.
Pricing signals work great (including for consumers) if supply/demand is elastic. If it's inelastic, it ends up looking like profiteering and passes on huge risks to those often least able to take them.