>Those that chose Griddy, chose higher risk, which comes with high potential rewards but also high potential losses<p>When I lived in the poor part of town, "energy deregulation" companies were always coming around, aggressively trying to get me to sign up on the spot.<p>They never talked about risk, they just told me I could sign here to save $100s on my power bill. I asked them about the details and they just lied through their teeth.<p>This was in MI, not TX. Maybe Griddy is different. I suspect they farm out signup to the same type of contractors.<p>I think the idea of consumers responding to energy prices is nice, but has some pretty glaring issues.<p>How many consumers are aware of hourly energy prices? How many on deregulated plans even understand that they pay more when usage is high?<p>Can they react fast enough to changing prices? Leaving a light on during vacation should cost you some money, but it shouldn't wipe out your 401k.<p>This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley.<p>At the end of the day, it still comes down to losing power or losing 5 figures of cash that you probably don't have. Most people aren't in a position to be "homo economicus" when it comes to heating their home in a blizzard. It doesn't solve their problem to give them a <i>choice</i> between losing power, or going bankrupt. Many will choose to lose power, and die running their car in the garage just the same as if they had a blackout.<p>If price sensitivity causes someone to set the AC on 80 the hottest day of the year, that's great. But expecting consumers to handle tail risk is a silly idea.<p>I suspect you could get 99% of the effect by only passing a small price window to consumers, and managing the tail risk collectively.
There are some interesting details here but let's be suuuper clear, <i>nobody</i> in the residential sector consented to a 12,000% increase in power costs or a $5,000 - $16,000 power bill this month. I think the article tries extremely hard to forgive everyone involved aside from the residents who have now been completely devastated by this.<p>The only real acknowledgement that residents have truly suffered something they didn't deserve is sandwiched between statements completely clearing Griddy & ERCOT of wrongdoing:<p>> The point is that while Griddy customers should definitely be entitled to relief, Griddy is not evil. Nor is ERCOT.
It strikes me that Texas is suffering the same sort of problems that companies that switch to just-in-time delivery do. When everything is working they're more efficient and can out-compete their neighbors, but since they're running with little to no safety margin it only takes one incident to cause immediate disruption to the line. Of course when the consequence of a disruption is you miss your production targets for the week it's not so bad. When the consequence is thousands of people freezing to death maybe you should step back and ask if this is really what you want. Is it worth saving a fraction of a penny per kWh if it means the system can't budget for extreme events or even long term maintenance?<p>Markets are extremely good at optimizing for the lowest cost (most efficiently) solution, but they're no good for planning for unusual events or for handling externalities. At some point a government needs to step in and set some (unpopular) ground rules so the players in the market don't have to race all the way to the bottom to stay competitive.
I didn't see this mentioned in the article, but there are many time-of-use plans that offer variable rates without exposing the consumer to additional risk.<p>For example, my electric plan has different rates for "peak" (4pm - 9pm), "super off-peak" (12am - 6am), and "off-peak" (everything else). But these rates are fixed, so I know in advance how much I'll need to pay.<p>This still incentivizes me to shift my usage to lower-demand times, flattening the demand curve under typical conditions. But it doesn't expose me to tail risk.
From the article: "Consumers who aren’t exposed to price risk have no fundamental incentives to conserve energy in times of need."<p>But, at the same time, consumers that have no visibility into their current electricity prices are unable to alter their behaviour. Until there's extremely high-resolution, real-time price transparency, this system is destined to fail.<p>Also consumers have base loads just like generators have base loads: you might defer doing laundry, but no one is going to unplug their refrigerator during a electricity price surge. Again, this simplistic spot pricing scheme is destined to fail if it doesn't meet consumer's need to have predictable baseline consumption rates.<p>I weakly agree with the author here that demand-based pricing is in everyone's interest, but that said, last week in Taxas was a systemic failure of immense proportions and everyone involved in planning Texas' electricity grid should be ashamed.
Is there a reason why time-of-use systems can’t have a customer-defined price limit, beyond which they opt into a blackout? The sense I got from the stories of people suddenly facing five-figure power bills is that most would have gladly spent a night or two with propane and candles rather than cleaning out their savings.
Basic goods should never be in unregulated markets. People are overwhelmed by these complex products. There is no reason why someone needs to spend a weekend trying to understand how much electricity will cost. US productivity is the real loser here as millions of people have to waste so much time.
1. The statement "it’s clear that those high prices weren’t doing their job" and subsequent disagreement with raising the price cap does not make sense to me. Any artificial price cap seems to limit the effectiveness of a market. From the producer's side, it limits the incentive to model and capture these tail events (e.g. winterize). From the consumer's side, it limits the incentive to reduce consumption. Is my perspective off here?<p>2. Is it possible to subscribe to two (or <i>n</i>) energy plans? Imagine subscribing to a wholesale plan (e.g. Griddy) and a fixed-rate plan and switching between them whenever wholesale prices rise above the fixed rate. Are there legal or practical reasons this can't happen?
griddy customer here.
I entered into the contract of my own free will. $1/KW was in my mind as the highest it could go, and for me that was acceptable. So, about $100 a day is what I thought my downside was.
Saved a lot over the last 3 years.
On Sunday night, griddy was taking $100 payments from my bank account repeatedly. Given the forecast, I jumped on the web and moved to a different provider (I must stay with them for a month, if I leave earlier there is a $150 penalty).
Total cost for electricity during this time, just under $700. My usual bill was $70 to $100.
this consumer understood the risks. i knew what i was getting into. and i jumped when it became more expensive than i was willing to pay.
those that say "changing providers is cheating", i understand your point. ny action was in my own self interest.
There are a couple of important things to note here that I haven’t seen get much discussion.<p>First, assuming that residential customers can understand the pricing dynamics that are going on is a really bad assumption. It is very complex because there is an interplay between their natural gas service and their electric service, both of which are buying gas from the market on the customer’s behalf. The agents for each company are contractually obligated to supply energy to their customers at any cost - and this is a real problem in this type of situation. In effect, the customer is bidding against themselves via the gas & electric companies. Even in some ideal world where the consumers have full real-time price transparency, it would be extremely difficult for the customer to understand the costs of their actions and the best balance between the two services.<p>Second, it should be noted that the astronomical gas and electric prices in those markets did not really accomplish anything. They brought on very marginal amounts of additional energy (beyond about 10x average prices there is almost no meaningful additional capacity that can come online because nobody in their right mind would invest in infrastructure that could only operate at those prices). Those prices also did not provide useful information that residential customers could evaluate and act on on the demand side (price sensitive industrial and large commercial customers would shut down at far lower prices than was seen).<p>Ultimately, what occurred was an emergency situation and disaster. Pricing and consumption controls should have been initiated when energy emergency alerts were declared in the gas and electric markets, as the market structure is not setup to operate effectively during these situations. It was a total failure. The only things that worked were the reliability plans that grid operators have in place to disconnect customers in order to prevent complete failure of the electric grid.<p>Ultimately, in an emergency/disaster situation there should be a different set of rules that determines who gets the energy and caps the cost.<p>Note that the winterization discussions going on elsewhere are also extremely important, but those problems are already being covered well.
The big takeaway from all of this should be the critical cyclic dependency of natural gas power plants. That is, if your primary source of power is natural gas, then you must have reliable power to the natural gas wells to produce natural gas. If the power becomes unreliable, then natural gas pressures in the pipelines drop to unsuitable levels to run large generators. As the generators trip due to adverse safety conditions, then your power generation decreases even further, thereby making the natural gas pipeline pressure even worse. It's entirely possible to foresee a cycle wherein a grid powered mostly or entirely by natural gas could end up unable to maintain <i>any</i> power generation under the right circumstances.<p>This is a very strong and compelling argument for maintaining some core baseload generation capacity that is completely independent of existing power generation. Batteries could be one solution. Nuclear is another. Geothermal could be a good solution to this problem.
For me this model looks insane, so you can save a few hundreds of bucks per year in electricity costs, but when extreme events happen (and they certainly will), you will wipeout decades of "savings".
You either need some insurance or hard price cap. People are bad at estimating risks...
Combining real-time data, market with speculators and a product that demand immediate, real-time delivery is a recipe for disaster.<p>When demand exceed supply, given the real-time nature of the product speculators can come in a take you to the cleaner if they had any chance to beat you to foretelling this would happen.<p>As I understand it, ERCOT puts a $9000 per MWh to put a limit on speculation, but then what happens is you have to take people off the grid.<p>The desire to "maximize efficiency" by surfing the demand curve with real-time data is not worth worth the expense of smart meters and risks. Dumb demand curves have another advantage: the utility is forced to over-estimate demand, creating a built-in safety margin.
I am not in Texas, so a couple of questions for those who may be affected by this story, because I've been wondering about this:<p>1. If you are on this plan, what is your visibility into current prices for electricity? e.g., are there any alerts that you could have signed up, even if you hadn't before?<p>2. Have you been bitten by unexpected high prices before, perhaps in the summer?<p>3. Prior to this event, would you say you saved money overall with Gridly?
Griddy should have bought calls and passed along the premium cost and protection. I don’t know energy market options pricing, so maybe this is not viable.<p>> <i>the amount of money they are due as a result of this market design ($50 billion!!!) is truly staggering and disproportionate to the value created</i><p>This is a screaming incentive for winterisation and energy storage. The premium is fine. It was mostly paid for by intermediaries.
In the UK energy supplier Octopus has an "agile" tariff which is similar to griddy (we are increasingly getting negative prices here).<p>However, it has a 35p/kWh price cap (2-3x average rates).<p>I don't understand why Griddy didn't do something similar. Even a $1/kWh price cap would have really helped them.
Smart meters are an essential part of the technocratic control structure. It is imperative that technocrats (those best able to manage the populations) have all the information about individuals and household electric and water usage, so that they are able to finely control and manage these precious resources.<p>It can't be long until we start to see value judgements about usage - 'your electricity usage for a heating or some such, is too high or beyond your allocation, so that has been charged to you at the regulatory tariff rate. Do you want us to send you a tutorial about how to better manage your energy usage? Would you like to move to a premium energy rate?'
> If you pair a retail energy provider like Griddy with an advanced suite of home efficiency technology, like programmable or price-responsive thermostats, you can have a building that automatically tailors its energy usage to the market environment<p>One major piece of this puzzle that is, IMO, missing, is the lack of any reasonable, standardized way for a hypothetical smart home to communicate with the grid. With a smart meter, a properly ZigBee certified (why? probably some silly reason involving “security”) end user device can get current usage data from a smart meter. (And this data is blatantly wrong in any nontrivial circumstance.)<p>But and end-user device has no way to negotiate pricing or load reduction with the grid short of going through some intermediary on the Internet. If I want to program my house to reduce consumption when prices are high, I can’t.<p>An an example, a car should be able to tell the grid that it wants to buy x kWh at a maximum power of y kW between now and 5 AM, and the grid should be able to tell the car when to buy it. I don’t mean Tesla negotiating this on behalf of itself or its customers - I mean the car or the house talking to the meter or the utility. No unnecessary or unavoidable intermediaries please.<p>It doesn’t help that PG&E does not accurately know the topology of its own grid. Oops.
Can anyone tell me: Why is there no automatic stop-limit the customers can opt into?<p>Once the $/KWh passes some threshold, power either gets turned off, or they get some short grace period to figure out whether they want to continue or stop.<p>Price runs like these are things consumers will experience probably a handful of times in their lifetimes. If they run wild, they can financially ruin someone. In the grand scheme of things, these are black-swan events. There should be safety guards in place.
The original vision of the Smart Grid (by competent engineers at EPRI and elsewhere) was to ensure better reliability, resilience, and efficiency of the grid under a mix of new generation, transmission, and distribution technologies. Unfortunately--as often happens--managers took the buzzword and changed its meaning to "A Good Way for Us to Make More Money by Throwing Smart Meters on Every House." Any thought about increased reliability and resilience went out the window.<p>The Smart Grid can still deliver on its original promise of a dependable, bidirectional electricity generation and delivery system. But in order for it to do so we're going to have to get rid of all the decision makers who only care about squeezing short-term profit out of the idea. It's going to require thoughtful, long-term investment.
Most unexpected high costs like this are covered by some insurance product. Why is this an exception? For example: consumer bets that they will have an insane bill at some point, policy writer bets they won’t and a premium for this bet is established. Premiums can be adjusted by the $/KW threshold at which point the policy takes effect, and inevitably some deductible.
Looks like those who had power, could keep the heat going. Those that did not, had pipes burst from sub-zero temperatures. This flooded a lot of houses, even with water shut off.<p>But those who had power are getting dinged with a ridiculous bill. Cascading failures, with no escape!<p>Hope everyone can recover!
This article reeks of the author (and author's customers who read this blog) trying to justify away their internal guilt. Author is trying to paint a picture that "there is so much complexity this isn't easy to fix and no clear party to blame".<p>Nonsense. There should be a price ceiling to consumers during natural disasters like this and regulations powerful enough to mitigate them more effectively.<p>People are not able to make rational financial decisions when reducing power consumption means your 11 year old child could freeze to death. I think the death count from exposure (freezing to death) in TX during that period is now 4, and I expect that will climb as we get a more full picture.<p>Meanwhile, many office buildings and rich neighborhoods had relatively uninterrupted power. What resulted in this class-stratification of power availability?<p>An energy exec was recorded on a call saying that the storm was "very good for them" in reference to the high profits made during the storm. Should these companies be allowed to rake in cash on one side of the system while passing thousands of dollars bills to their consumers on the other side to profit off human misery and misfortune?<p>On the other side, other energy companies skimped on winterization, leading to their gas lines freezing. Does anyone think "not being able to price gouge during the 4 most profitable days this year" is sufficient market-punishment to change behavior of these actors?<p>ERCOT and the energy players built a system that killed several people and made hundreds of thousands miserable. Author says "ERCOT is not evil", but I disagree: intent is irrelevant if greed motivated lack or risk management results in this scale of death, misery and destruction. Everyone working to make energy a "free market" in Texas has a share of the blood on their hands from building a system that led to this outcome. There should be a thorough investigation and several people deserve to end up in prison as a result. But, being that this occurred in "free market" loving Texas, I won't be holding my breath.<p>Perfect example of why basic human needs should not be run as a for-profit "free market".
From the article:
>> TL;DR: time of use rates are, on net, a Good Thing; markets are great, except when they fail; low risk isn’t the same as no risk; ...<p>NO, this is not an example of "Free Markets" failing.<p>This is Free Markets working exactly as designed.<p>Demand massively increased, due to the cold weather
Supply dramatically shrank due to the same cold weather
The market is dynamically priced
OF COURSE prices went hyperbolic<p>Why wasn't this tail risk/opportunity anticipated by the various suppliers, so they pre-built their systems to withstand such cold weather, to be able to take advantage of the windfall?<p>Because literally no one could afford to do so. The general market is a free-for-all low-cost race to the bottom. Invest more and you won't be competitive. Moreover, if enough people follow your strategy, you'll never see the windfall. No one can make the decision to invest in any quarter, so it never gets done.<p>Yes, intelligent regulation is a pain in the arse, but free markets really do only one thing well - dynamically allocate resources and adjust pricing. Important, for sure.<p>But a complex society also needs disaster planning and resource allocation, and to prevent Tragedies Of The Commons, both of which Free Markets(TM) will not only fail to solve, but will aggressively screw up.