I'm in Texas, and lost power for > 72hrs.<p>I'm not on a wholesale rate plan, but if I was, you can bet your sweet ass that I would be A. monitoring the wholesale price B. switching off my main breaker the moment the price went above $X.<p>As such, don't really agree with the conclusion of the article. We mandate having car insurance not because we care if you can't afford to fix <i>your car</i> when you wreck it, but rather because if you crash into <i>someone else</i> we don't want you to dodge paying for what you've done to them.<p>Electricity is entirely a <i>you</i> thing. Your neighbor/society doesn't get hurt if you use Griddy with uncapped rates, only you do (and as pointed out above, you can avoid this if you're smart). Yes people will get burned, but I don't want to live in a society that tries to prevent people from ever making personal mistakes – mostly because such attempts usually don't succeed, while also curtailing my freedom in the process. And just to reiterate, this doesn't apply if there are negative externalities that affect others.
Amber Electric in Australia has this same model of passing the wholesale prices on to customers.
But they have a cap.
"We pass through the 30 minute wholesale prices directly, and this is typically significantly cheaper than the Government’s Default Market Offer, but to give you peace of mind we guarantee you will never pay more than the Default Market Offer (or VMO in VIC) over a year or we’ll refund the difference."
<a href="https://help.amberelectric.com.au/hc/en-us/articles/360037454851" rel="nofollow">https://help.amberelectric.com.au/hc/en-us/articles/36003745...</a><p>I think this is only possible because there is lots of regulation on electricity providers in Australia.
Cue up any discussion about SEC rules etc. It's fundamentally a discussion about whether the "little people" should be allowed access to somewhat complicated instruments than can give them access to (mostly fairly limited) incremental financial gains that require some sophistication to understand and hedge properly. But which, if things go south, can result in huge losses.
I work for a bank in risk.<p>The premise of the article is correct.<p>Risk is cost. A company that can manage their risks better face less costs and ones that can eliminate the risk altogether (for example by passing it to their customers) fares even better.<p>Normally, companies like Griddy buy financial products (which I help build) that let them insulate themselves from some portion of that risk. These products are not sold for free, obviously.<p>When you buy an insurance it is understood that the insurance company is going to make some money on it. You buy insurance because you want to insulate yourself from an event that could potentially cripple your finance, living standards or future prospects for a long time.<p>By passing the risk to their clients, Griddy did not have to pay for any kind of insurance or hedge against market volatility in any way.<p>Unfortunately, people who bought this were not savvy enough to understand they need to insure themselves in some way and that this is not really worth it.<p>It does not help that it is apparently not that easy to change where you buy energy when nobody wants new clients and would gladly get rid of the ones they already have.<p>---<p>I am not from US and I also don't know energy markets, but my understanding is that these kinds of markets are going to be volatile because of basic fact that energy demand is quite inelastic.<p>Normally, when the demand is elastic and the price goes up, some people would decide to stop buying thus keeping some kind equilibrium between supply and demand at some sensible price.<p>Unfortunately, most people will not decide to stop heating their houses when demand is not able to meet supply and this means energy market can behave in an extremely volatile way.<p>What I wonder is where are businesses, industry, factories that I think should normally consume most of the energy and should be first to switch off when supply falls.<p>People wanted energy to be deregulated? I personally think basic necessities that people absolutely need to have should be regulated to some degree. You don't want to wake up and find a medicine you need to sustain your life just went 10000 percent up because of some random market event or that your hospital suddenly can't buy energy because it is too expensive.<p>Some systems (like home budgets or small businesses) are built on a very tight margins and are really sensitive to that kind of volatility. Maybe large companies can absorb large swings in prices but normal people should not be living in fear that their livelihood is going to be taken from them for some random market swing or AI decision.
Things like this (basically a form of ‘self insurance’) should require you to post a largish bond to participate.<p>As is you’re effectively doing commodity trading with fixed demand and no safety net.
Griddy is saying the price hike was artificial. I am not sure if it makes sense or if it's misleading.<p><a href="https://www.griddy.com/post/griddy-update-why-energy-prices-were-sky-high-this-week" rel="nofollow">https://www.griddy.com/post/griddy-update-why-energy-prices-...</a>
This is on some deep level what society is for and how humans survived in a hostile wilderness for so many generations: by pooling resources to reduce risk. If I’m alone in the forest, and I break my foot, I can no longer hunt, and I may die. But if I’m a member of a tribe, the others will bring me food until I can walk again. It’s the foundation of human behavior. We are social animals not because we’re just nice, but out of necessity. It’s about survival, in the end.<p>Pooling resources for power costs, or for health care, or any other purpose, serves the same purpose: survival via reduction of risk.
This is the reason we have consumer regulation. Markets are volatile. Markets are complicated. And while it's true that expert traders can find efficiencies in buying commodities at unregulated market prices, it is in no way acceptable to demand that all of us be experts in the market commodities we need to be a part of society.<p>I can all but guarantee you that no one who signed up for Griddy ever thought they'd get a bill like this. I can also guarantee you that there were Texas energy market experts out there who knew something like this was an eventuality. And that is why "Griddy" should never have existed.
Or the lecture is that we should go harder on individuality. Ironically this same blog has a post titled "Review: Moixa Solar Battery". If you have a 100kWh battery at home to tide you over the 3 days it's cold (and electricity costs $9/kWh) but can otherwise directly access the wholesale pricing, what is not to like?<p>I'm not sure if anyone has done the math on what kinda timescale you are looking at for return on investment with a 100kWh battery, but given that most electricity grids in the world have e.g. different day and night rates, there is an obviously untapped market for arbitrage.
I just found Griddy's post on this: <a href="https://www.griddy.com/post/griddy-update-why-energy-prices-were-sky-high-this-week" rel="nofollow">https://www.griddy.com/post/griddy-update-why-energy-prices-...</a><p>TL;DR they say the Public Utility Commission of Texas has control of prices and is forcing them to be extremely high even though there is no reason for them to be based on supply and demand.
Well, in the field of business we have limited liability, which limits the individual liability of the owners and also puts a damper on whatever risk a possible creditor might take with a debtor. But Griddy manages to drop unlimited liability onto individuals, and this isn't how it's supposed to work.
This crisis in Texas is also a good argument for why price gouging during a shortage doesn’t work the way anti-regulatory advocates said it would.<p>The theory is as such: raising prices during a crisis does two things. First it encourages more production, since anyone producing (or more likely, moving) shortage goods into the affected area will be compensated. Secondly it discourages non essential consumption, as everyone cuts back to the bare minimum. This is the basic theory of prices driving resource allocation (one of the cornerstones of capitalism) being applied to a crisis and the resulting resource shortages.<p>The issue here in Texas is that this didn’t happen. In theory producers should’ve run extra capacity to take advantage of the crisis, which should end it. Instead they ran the bare minimum, didn’t winterize, and pocketed the profits. It was also impossible to move extra energy in, both due to diminished excess in nearby states, and a lack of robust cross-grid connections. Secondly a lot of this demand isn’t elastic. If you’re counting on an electric heat pump to warm your home, then you <i>can’t</i> cut consumption during a crisis; you’ll freeze to death. This means that the rising prices don’t cause people to curtail consumption, because nobody will willingly freeze themselves and their water pipes given the choice.