And ISOs/RTOs/TSOs operate in complex political environments and have to ensure reliability in adverserial markets. They are often constraint in what they can/can't do.
What I will say is that their modelling should absolutely be open and transparent, and typically it's not. That would make necessary discussions around modelling assumptions, potential improvements and political constraints much much easier and more fruitful.
[1] That said, my intuition is that current outages are probably not due to supply insufficiency, but due to transmission system failures.
That was not clear in the article.
That could have been prevented by simply not permitting connections in certain parts of the network. Yes, theoretically it could also have been prevented by forcing generators to directly bear re-dispatch costs which would have led developers to build a different set of generating assets. This would have been a different set of market mechanisms.
However, if generation decisions had been made centrally, they would have been made by the same system operators, regulators, and governments that mandated the construction of the current system and they would have therefore built the same system more or less. Do you really think that if e.g. Germany or the GB network had been centrally planned by their respective government mandated regulators and system operators, they wouldn't have put all those windfarms exactly where the market-led model we actually have has put them?
You don't seem to understand what's driving the so-called re-dispatch costs in Germany so let me explain: when there's power consumption in the South, it is paid at the market price, when the "supplier" is located in the North (typically wind) and there's not enough network capacity to transfer the power to the consumer, the transport authority sends an order to the supplier not to produce the electricity, and instead pays a thermal power plant in the South (at a higher price than market price, by definition) to provide it instead.
That's not a problem of physical realities driving constraints, that's the problem of a market that uses a very simplified model that simply can't deal with the complexity of the underlying phenomenon (we don't even have enough computing power to accurately model the electricity transport at national scale given how challenging the equations are, and even the lineralized version that are being used in practice are already very compute-intensive, it's entirely futile to expect to build a market that can efficiently reflect them).
This is a huge "it depends", because we are then comparing a partly-political system with a fully-political system. The privatized model builds at the optimal locations for getting paid under the prevailing rules; the state one is much more prone to getting distracted by lobby groups. See the German over-dependence on coal and the UK conservative ban on onshore wind farms.
I will be interested to see how the deployment of affordable battery storage changes the economics. I've also seen a striking presentation about how much renewables the UK plans to deploy (roughly double!) by 2030. More on the strategy: https://www.gov.uk/government/publications/clean-power-2030-...
"Clean Power means that by 2030, Great Britain will generate enough clean power to meet our total annual electricity demand, backed up by unabated gas supply to be used only when essential."
(note details of wording)
This is anti-scientific woo. Both theoretically and empirically market-based electricity systems are much more efficient, that's why even China is adopting one: https://www.enerdata.net/publications/daily-energy-news/chin...
This is hilarious coming from someone defending a concept that assumes neither thermodynamics nor Maxwell's laws exist.
> Both theoretically
When making preposterous hypothesis you can prove literally anything to be efficient.
> and empirically
Ah yes, like the PJM and the European market are “empirically efficient”.
https://inthesetimes.com/article/the-excel-error-heard-round...
It also reminds me of the flaws in the London epidemiological model about how to respond to covid.
It just may be that these things should be reviewed a little closer by people who are obsessive about correctness
No amount of review is enough. As anyone who's worked in quant science will attest, a model that hasn't repeatedly made correct out-of-sample predictions is most likely worthless, as it's far far easier to overfit a model to data than to predict the future.
That one was fun. I got into an argument with a scientist who was (IIRC) working with or for the specific professor that made that mess, and he blamed the entire software engineering/computer science industry for making C++ too hard to use, and said it should never have been released if mistakes like this could be made. And then accused me of gatekeeping when I said perhaps they should get an expert to look over this stuff before submitting results to governments to form a policy basis.
The attitude seemed to be "I am a scientist and am clearly very smart, and therefore anything you do must be trivial in comparison. If I can't pick up in seconds what takes you years to learn and more years to perfect, you've clearly done it all wrong and it's your fault."
Whilst these sorts of analyses are informative, they lack answers to the who profits? question.
The intention of the payments is to increase revenue for that kind of power generation capability to encourage more such plants be constructed.
The argument in the article is dubious to me. Of course the higher price isn’t leading to more generation today, that’s not the point, the point is to reward developers that build and built capacity CA needs in winter. The disagreement then becomes which model is correct about how much capacity is actually needed.. but the fact that a tiny move in demand moves the price so substantially seems to me to undermine the entire premise of the blog post, clearly supply is severely constrained?
I’m not a quant, and I’ve worked energy trading desks long enough to know there is a lot I don’t understand.. but I don’t see how separating auctions by plant age does anything other than move numbers around while keeping the total bill the same. Plants still need the same lifetime revenue to make investment decisions pencil out; whether you front-load payments or spread them evenly, the total in current value needs to be the same.
So it can matter how we distribute that revenue as to whether or not the business responds in the desired way, eg, actually investing in new capacity by linking payments directly to new capacity.
2. If no new or existing market participants are willing to expand capacity, that would indicate that existing prices aren’t worth it for them to do so. Companies are willing to spend far more than the cost of building a new power plant for things like AI - and they’re often even building power generation on top of the AI build outs. So it has to be more than “It’s expensive”.
I know how I feel about this - I much prefer price signals here; it allows any developer that can meet the spec to build energy production - distributed decision making over centralized decree - and it allows the other side of the equation, consumers, to decide they'd rather not pay for this generation: Curtail demand rather than increase supply.
Like - maybe I don't want to pay energy prices this high, I can choose to insulate my house better or get a heat pump and thus reduce my electrical bill. The price signal lets everyone in the market choose how to act, rather than a central authority declaring we must build, say, more gas turbines and share the cost of that across rate payers.
But, there are people much, much smarter than I that completely disagree with this position. In the end I think the answer is how you feel about human nature, the capability and shortfalls of markets and the complexity of deciding how societies' resources should be allocated.