If you were a tree, what tree would you be? 
According to this interesting document on the energy.gov website,Texas requested permission from DOE to generate additional capacity. The document, signed by “acting” Secretary of Energy, states that Texas may generate additional power using “specified resources” provided that:
This incremental amount of restricted capacity would be offered at a price no lower than $1,500/MWh
(subparagraphs i and ii page 3)
Chris, that order is about temporarily removing emissions limits on power generation plants until enough capacity comes online to bring the prices back down to normal.
…exceedance of permitting limits, including sulfur dioxide, nitrogen oxide, mercury, carbon monoxide, and other air pollutants, as well as exceedances of wastewater release limits
It says that when those plants are running in excess of their permitted levels, the price has to be at least $1,500 / mWh or higher, or they’re in violation.
This incremental amount of restricted capacity would be offered at a price no lower than $1,500/MWh. Once ERCOT declares that such an EEA Level 2 or Level 3 event has ended, the unit is required to immediately return to operation within its permitted limits;
So, when the EAA ends, and the spot price drops below that threshold, the generators have to return to a state of adhering with the permitted environmental limits.
What I found most concerning was remarks coming out of ERCOT that only quick action by operators saved the system from going into a “meltdown” that would have resulted in a month or longer recovery. If power was lost in the state for a month, all vestiges of civilization would have been lost also. My main concern would have advanced from the usual mundane matters to not ending up in a younger person’s oven. There is no way that it is worth risking civilization itself just because this event doesn’t happen all that often and a small bit of money can be saved.
Another thing is that poor maintenance protocol led to plant outages which led to high spot prices. There is no way that poor maintenance should be allowed to translate into financial windfall. If this is allowed to occur then bad maintenance is being rewarded and we can expect more of the same going forward. That might be part of the calculus of not improving plant maintenance after the last crisis resulted in recommendations (not implemented).
Regards,
Bob
Change “maintenance” for “planning” and you have a fundamental idea of American capitalism. Oil refineries in hurricane zones. Uber with not enough drivers on the road at peak times. Toymakers making too few Cabbage Patch dolls. Poor planning for demand can sometimes be more lucrative for those with the supply than if they had supplied enough to begin with.
I am confused when I see people say this the companies that had the financial windfall were producers that were able to operate during the storm.The company’s who did not have good maintenance and were not able to operate they were not able to take the gains from being able to operate.
In fact this method does exactly what it was designed to it encourages producers to produce when there is scarcity.
If regulation is passed to modify this it would just discourage maintenance because in these troubled times the juice is not worth the squeeze.
During the initial periods of actual scarcity, yes, this is somewhat true. However, PUC/ERCOT held prices at the cap by fiat for days when the market had determined that the ‘proper’ price was something far closer to the seasonal norm.
And honestly, “We can’t run the nuclear reactor because the temperature dropped below 20F for more than a few hours” is some amateur-hour sh_t when it comes to the electric grid which is so fundamental to the 21st-century economy.
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This would be true if we had “mom and pop” style generators where you didn’t really have people who own more than 1 at a time. Once that isn’t the case though, if I have 4 generators, and I take one offline and I can sell the remaining power of my 3 generators at 100X the price, that’s when it starts to get pretty sketchy incentive territory.
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That only works if everyone is in on the scam. There are hundreds of companies competing to generate power in Texas. It’s highly unlikely that all were in cahoots. It’s far more likely that they were simply unprepared for the weather and related problems.
https://www.puc.texas.gov/industry/electric/directories/pgc/alpha_pgc.aspx
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Of course, and then once the problem had been created they had every incentive not to fix it quickly and ride the high prices. That’s what I’m saying.
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Luke,
Doesn’t require that everyone be in on a scam. While the list of power generators looks impressive. Many are tiny captive producers such as Walmart solar panels on the roof or a refinery or manufacturing plant. Some are listed with 0 Mwatt capacity. Luminant (TXU) and NRG by themselves may have more capacity than 80 or more percent of that list. So, when demand spikes, if a few of the biggest firms have wide spread failures of their peaking plants, a huge run up in spot pricing can occur and be extremely profitable for the online regular demand plants.
Also, a “conspiracy” is not required due to the tendency of “sameness” that frequently occurs in business practices. Virtually all airlines have baggage fees now, but none years ago. Recruiting firms have non compete agreements. Brokerages have arbitration clauses. Drug firms have enticements for prescribing doctors. Most of this is not due to conspiracy but rather to cross “pollenation”. Could also occur in peaking plant non maintenance?
If ERCOT were well connected to the US eastern and US western grids when this spot pricing spike and outage situation would be greatly ameliorated and crummy maintenance protocols would matter so much. But FERC might also compel better practices.
Former Gov Perry says that I would be willing to endure more than three days of outage to keep federal regulators out of the state grid. Well, if that meant I was excused from federal taxation yea; but to avoid having Luminant (TXU) being ordered to heat trace and insulate some piping, no way!
Regards,
Bob
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Using your example, you have 4 money printing machines, and you’ll leave 1 of them offline. Whoever turns on their money printing machines first get the most money. You would turn on all 4 of your money printing machines if you could. As would anyone you’re competing against.
Saying people didn’t have an incentive to fix things is absurd. They absolutely had an incentive to fix things. What they didn’t have an incentive for is to prevent problems in the first place. That’s because Texas has an energy only market instead of a capacity market. This is by design and intentional.
If you don’t like it then vote for people that will change it. I suspect it’ll be a topic people care about in the next election.
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You’ll notice I said 3 on and 1 off, which is actually close to the real number. 75% of 100X what I normally make in profit is not worth turning on the extra 25% capacity to lower your profit to 1.
Also, I see you ignored Bob’s point of the two companies that had outages owned 80% of the infra. Every other company on that list could be at 100% output and as long as I’ve got a good excuse I’m not turning on my 25% remaining I’m going to be printing money. Hell, I might even shut down another plant if there wasn’t a price cap at 9000. Save on the fuel costs of having it running AND increase the price.
Nope, it’s not absurd, it’s true. If the market were fair, and we didn’t have big players, ie: “mom and pop above” then it would be absurd. The issue is we don’t have a fair market we have a “free market” which means 2 companies own all the clout and can take a little advantage of a bad situation.
@Team_Moderators I believe the thread has reached the point of fruitless arguing and that is not the intention of my creating it. Can we close the thread?
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