Isn't the market failure – Watt?

from masterresource

Robert Bradley Jr. – February 14, 2025

ed. notes: Four years ago, Storm Uri made the Central Planned Wholesale Market (ERCOT) in Xusas buckle, demonstrating warnings about the state’s wind/solar dependence. Mainstream media involves natural gas, no exploration Why the reason behind it. Instead of deregulating, Texas opted to increase wind, solar and batteries while subsidizing natural gas power plants to resist intermittent. Now, the repeating grid is improving in a state that may depend on residual gas.

This is not a story of weird weather causing market failures. This is a classic application of political intervention in political economy: visible and invisible, expert/regulatory failure, and unexpected consequences.

Don Lavoie, an outstanding thinker in the field of market and government planning, once warned:

If the scope of knowledge of the guiding agency is not as good as the system that the system tries to guide, and worse, if its actions are bound to have further undesirable consequences in the work of the system, then what is happening is simply not planning some agent. Blind intervention in other programs. ” [1]

In other words, the plan is messy.

The failure of Texas government electricity has led many power design experts (including technologist Lynne Kiesling); Texas Public Utilities Commission (PUCT); Texas Electricity Reliability Commission (ERCOT) ; and the Texas Legislature. Other participants in the distance are the Federal Energy Regulatory Commission (FERC) of North American Electricity Reliability Company [né Council] (NERC); and the National Association of Regulatory Utilities Specialists (NARUC).

Classical liberals can link experience with theory to determine the failure of experts/regulations. It's no surprise that electricity is the most regulated industry in the United States for U.S. currency and banking and national defense contracts.

humble opinion

The “mainstream” view is that the “extreme tail incident” captures private sector companies, mostly gas, and is not ready. Regulators do their job in most cases. I challenge this explanation in detail here and here. I said: “Renewable energy, representing more than a quarter of Texas’ capacity, has almost disappeared from the top of the mountain.

But the second part of the story is very important: tax-driven pricing of wind severely hurts the economics of existing gas and coal-fired power plants.

However, rare events are not the market situation of market reform. In the case of government, the inertia of intervention leads to more interventions: ongoing wind/solar energy, battery storage, and even talking about demand-side responses (instrumentation technology and incentives). In other words, experts can solve this problem through a lot of research and planning.

Anron analogy

This reminds me of the (shallow) Anron explanation. Enron made bad investments, tried to cover them up, and lost market confidence. They went bankrupt, “market operation”. Why do you have to fail in a lot of ways? A book summarizes the fish rot on the head. but Why?

Like Enron (as with power outages), I think something bigger is working. yesOpposing capitalism,'The pursuit of the unknown, form Rent seeking universally,,,,, Strategic deception (“Philosophical Fraud”, fraud lacking prosecution) and No doubt Adam Smith, Samuel, Ayn Rand and Charles Koch warned.

For me, at least understand the explanation of “systemic failure” of “why behind it”, for example, Anron opened up many deep thoughts that tested and extended my theory. Given all the warnings on our side of bad business practices, and the electricity side of Texas in February 2021, capitalism is not a blame.

Reinterpret support

In Texas, the surface interpretation of wind and solar energy disappears at the peak just starts. (“This is what the planners expected – they can't be blamed.”) The gas company from the wellhead to the power plant has a lack of atmosphere. but why? Reliability is the job 1 of Electric Power 1, which is outsourced to regulators with very (regulatory) weakened/dispersed industries. Coordinated releases a lot!

“Why Behind” suffers a lot of regulatory and political/social pressure, which makes private sector parties the worst. Consider the expected and unexpected consequences of governments, especially forced winds. The intermittent and negative pricing of wind (from the federal tax credit) destroys the economy of conventional power plants.

Regarding (MAL) coordination, federal and state regulations have been divided into three phases to classify the gas industry, and so is electricity at three/four phases. There is no vertical and horizontal integration of “electricity majors” or “gas majors” (regulation forces industry classification). Actually, we need to be professional. (By the way, the integrated business strategy (“oil specialty”) is part of the answer to the “shared question” of oil and gas production under the “capture rules”.)

They say electricity is different. Due to the nature of the electrons, large control areas are required. Lynne Kiesling said that a “public problem”. OK, then who do you trust? Market or expert/regulator? No, Hayekian/central planning solution with no private resources in power “sharing”.

Experts have been working on market design to find the right balance between reliability and price. Texas is almost all price (thinking that peak pricing for several weeks of the year will make up for the “capable payment” that does not have “capable payment” to prepare for peak demand). However, the shortage during the Storm URI reduced the price to astronomy levels, which will now lead to a large number of unpaids, lawsuits and the distribution of costs that may allocate socialism. Total chaos – Most of the regulators involved resign and have court dates.

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On Facebook, Lynne revealed with economist Steve Posttrel:

postrel: Based on the data I've seen, ERCOT always has a lower reserve margin than other grid plans. Ercot is now planning at 15-20%, but is still below the surrounding grid.

Kiesling: Reserve: Contrary to your explanation, I think other RTOs (especially PJM) have too much reserve profit relative to their ability to respond to higher prices relative to their ability to supply requirements and demand. Other RTOs (particularly PJM) are governed by generators, which are obviously motivated to have higher reserve margins than required. I say to you again: What do you think is the reserve fund to achieve 100% reliability in 20 years of extreme tail activities? ? ? ?

postrel: As I pointed out in another post of your, the decision to accept such a blackout (extreme freeze) (extreme freeze) cannot be excluded as the best policy, given the cost of incremental reliability. It is presumed that referring to the degree of public risk aversion, this will be a good topic for cost-benefit analysis. But the “excess” reserves elsewhere, even if enough to mitigate the current consequences in Texas, seem not that heavy and obviously super best.

This is a huge planning issue: reliability versus price. Experts (such as Kiesling) must tell regulators what to do. No, we can't let the market decide because it's a “public issue”. But I said: Relax regulation to allow power majors to enter the market …Other than that, at least consider “coordination issues” as an expert/regulatory failure, not a market failure.

It’s time to conduct an entrepreneur discovery process in a real market, rather than a mandatory open access to the artificial market. Companies must be allowed to internalize reliability functions with A-level company guarantees. Many laws must be abolished, another story.

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[1] Don Lavoie, National Economic Plan: What’s left? (Cambridge: Ballinger Publishing Company, 1985), p. 1. 95.

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Appendix: Reinterpretation of Storm Uri power outage

My post on the Texas blackout:

Wind, solar and power outages in the Greater Texas: guilty

Texas renewable energy 'market failed' natural gas

Electric Power Plan: Physics and Economy (Interview with Eric Schubert)

Ercot “works as planned” (Archit Hogan does not provide a quarter)

Civil society and gas during the Texas blackout

For other posts:

“U.S. winter prospects: cooler in the north and warmer in the south” (NOAA’s predicted bust)

Digital and Texas power outage (Bill Peacock: March 4, 2021)

ERCOT: Central Planning Government Agency

ERCOT: Government agencies

Renewable energy failure in Texas: Remember Georgetown’s new green deal

Rolling power outages in Oklahoma: Remember Audrey McClendon’s Coal War (Charlie Meadows: February 23, 2021)

Wind energy subsidies help freeze Texans (Bill Peacock: February 18, 2021)

Texas Wind: Will negative pricing blow out lights? (PTC with reliable new capacity) (Josiah Neeley: February 17, 2021)

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