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DV52

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https://www.washingtonpost.com/business/2021/02/16/ercot-texas-electric-grid-failure/

The Texas grid got crushed because its operators didn’t see the need to prepare for cold weather!!​


Interesting to read that Texas energy market (ERCOT) recently reached the maximum allowable $9,000/mwhr for five days from last Sunday (we call it "Value of Lost Load"- VoLL).

Even more interesting to read that apparently Texas regulators allow direct pass-through tariffs to end consumers meaning that those energy users who didn't respond appropriately will pay $9 instead of an average of 12cents for each kwhr consumed during the period.

For most mum-and-dad energy users, market price risk is at best a theoretical construct and their understanding of exposure to utility market volatility is probably nonexistent. For these folk, offers from retailers for what looks like low energy prices during times-of-plenty must be a big attraction . But as Texans facing direct energy market risk have recently discovered to their chagrin, huge costs increases can result if they don't get actively involved in curbing usage when prices rise!!

As is invariably the case, I've no doubt that the losers will clamor for changes in the market design when the outcome shows that the market is operating correctly!!

Don
 
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Uwe

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The Texas grid got crushed because its operators didn’t see the need to prepare for cold weather!!
It wasn't just cold weather. They had severe ice storms. Those cause havoc with an electrical grid even when there's no shortage of generating capacity. Oh, and such ice accumulation also causes major balance problems on wind-turbine blades, forcing those turbines to be shut down, lest they self-destruct from the imbalance.
But as Texans facing direct energy market risk have recently discovered to their chagrin, huge costs increases can result if they don't get actively involved in curbing usage when prices rise!!
Yep, plenty of consumers didn't bother to perform any due diligence before signing up to buy their electricity at the spot price. Asking questions like: "How high can that price go?" before abandoning suppliers who who offer fixed rates. Paying a bit more to a fixed-rate supplier is essentially hedging the market against events like this.

-Uwe-
 
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DV52

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It wasn't just cold weather. They had severe ice storms. Those cause havoc with an electrical grid even when there's no shortage of generating capacity. Oh, and such ice accumulation also causes major balance problems on wind-turbine blades, forcing those turbines to be shut down, lest they self-destruct from the imbalance.
OK -then the process of system-black seems inevitable if Texas relies on wind turbines to meet demand during these events.

As I understand, the reason that made the wholesale energy market possible in Texas was the fact the the electricity-grid was stand-alone (which meant no federal approval was needed). Unfortunately, this "advantage" has a profoundly different effect on the duration of market price during VoLL events!! Maybe generators in neighboring States see an opportunity to build an inter-connector (that's certainly the clear market message to prospective new entrants)?

Yep, plenty of consumers didn't bother to perform any due diligence before signing up to buy their electricity at the spot price. Asking questions like: "How high can that price go?" before abandoning suppliers who who offer fixed rates.
hmm..... I wonder how domestic energy metering works in Texas? Clearly end use customers who accept market pass-through tariffs need digital meters that can distinguish consumption to the granularity of the market clearing period. These kwhr meters aren't cheap compared to fixed tariff meters.

Down here, the regulator imposed a bulk meter change program, so the cost of digital meters was amortized over every consumer in the State. The value of doing this was doubtful given that the take-up rate for market based tariffs here has not been high. Not sure if Texas did the same - if not, the cost of the domestic meter for an individual user must have been spread over a number years making the contract (lock-down) period for the tariff a long time.
Paying a bit more to a fixed-rate supplier is essentially hedging the market against events like this.
Very true!! Having spent time in both the wholesale and retail energy markets down here, I can confirm the value of fixed rate tariffs - but it ain't all beer-and-skittles for end users that choose this option!

Fact is that it really depends on an individual's consumption as to whether the averaging process for pricing fixed-rate tariffs is advantageous, or not. The brutal logic of mathematics decrees that those who consume less than the average for the tariff-sector subsidize those who consume more. And because energy consumption is generally tied to socioeconomic status, this also means that for these tariff types, the poor subsidize the rich!!
 
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hmm..... I wonder how domestic energy metering works in Texas? Clearly end use customers who accept market pass-through tariffs need digital meters that can distinguish consumption to the granularity of the market clearing period. These kwhr meters aren't cheap compared to fixed tariff meters.

Down here, the regulator imposed a bulk meter change program, so the cost of digital meters was amortized over every consumer in the State. The value of doing this was doubtful given that the take-up rate for market based tariffs here has not been high. Not sure if Texas did the same - if not, the cost of the domestic meter for an individual user must have been spread over a number years making the contract (lock-down) period for the tariff a long time.
In the UK digital meters with time granularity (referred to here as 'Smart Meters') are being rolled out (voluntarily at present but I can see a time coming when they will be made compulsory) with the message that they will save electricity. The ability of utilities to charge usage dependent rates isn not widely shared or known, so it's a ticking time bomb.

The saving electricity message is IMHO spurious since saving electricity is done by the resident/company not by the meter - and knowing what your consumption is does not require a smart meter just a consumption monitor!

It's been estimated that the payback period for these smart meters in the UK (cost of meters and installation vs. reduced consumption) is around 40 years - which makes them unattractive on financial grounds (their reliability data suggests they will fail sooner than that).
 

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I wonder how domestic energy metering works in Texas? Clearly end use customers who accept market pass-through tariffs need digital meters that can distinguish consumption to the granularity of the market clearing period. These kwhr meters aren't cheap compared to fixed tariff meters.
Although I have no specific info about Texas, "Smart Meters" are pretty commonplace in the US. Just how smart they are varies, but old-school, purely electromechanical meters are quite rare these days. Some of them are smart enough to allow the utility company to dump large loads via slave "relays" through which (for example) an air-conditioner or clothes dryer draws its power, or via a special thermostat. The latter stuff is not terribly common and obviously requires access to private infrastructure behind the meter, meaning that it's nearly impossible for the utility to mandate it, but they provide incentives for to customers to install them. Another use for "smart meters", even in "fixed tariff" arrangements is to allow for peak vs. off-peak billing; my understanding is that this is big in California.
Fact is that it really depends on an individual's consumption as to whether the averaging process for pricing fixed-rate tariffs is advantageous, or not. The brutal logic of mathematics decrees that those who consume less than the average for the tariff-sector subsidize those who consume more. And because energy consumption is generally tied to socioeconomic status, this also means that for these tariff types, the poor subsidize the rich!!
Maybe we're not using the term "fixed tariff" in the same way? To me, it means, you pay X per kWh (or perhaps even X per kWh during peak hours, and Y per kWh during off-peak, but the price you pay does not vary with the wholesale "spot" price. It sounds like you're using the term as "flat rate", or z per month, regardless of usage?

In some markets, the utilities charge a low price for the first N kWh per month, a higher price for the next number of kWh per month, and even more for any kWh beyond that. To me that's an utterly backwards way to run a business. A good customer who buys more of your product should pay less for each unit thereof! :D

-Uwe-
 

Jack@European_Parts

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Here we have demand usage & it SUCKS!

The meter counts out the KWH and takes a picture of KW demand in 15 minute frame. It is done in a monthly cycle which is reset each month after the KWH's total are read, along with max KW draw. The billing is than compounded by the max KW used in that 15 minute window and you are billed a surcharge + the highest KWH rate at that KW draw, at that minor usage & for the ENTIRE month & even if you only used it for a couple seconds!

Criteria to be put on demand in NYS or at time being introduced to that fisting.

Exceed 10KW draw at any time.
Use or exceed more that 2500 KWH in a 3 month consecutive billing cycle.

This is why I speak from time to time about flywheel devices or alternate power storage methods & so the meter doesn't get its bell rung!

My shop bill from 1999-2005 with a separate area light rented & on a mechanical meter was about $130 USD - $150 USD.
In 2005 the electric company installed a new digital KV2 GE meter, YAY!

The bill went to over $1500 USD a month & stayed there for 2 years & even after a PSC complaint to have taken off.

It took strict observation of device usage & so it didn't meet aforementioned criteria to be removed, additionally storage devices or revised CAPS!

Up the road a small restaurant business location, cant survive since the dishwasher costs $3500 USD in electric to run due to this stupid shit, let alone the coolers & dining area!


The opto interface window being exposed and 'metermate' serial software made me wonder why people were not hacking them already?
 
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Uwe

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Here we have demand usage & it SUCKS!

The meter counts out the KWH and takes a picture of KW demand in 15 minute frame.
We had that in the 1990s at MSI in New Jersey. We had two big baking ovens, and two annealing furnaces, all electric. We were pretty careful to run only one of them at a time, 'cause running more than one simultaneously would put a big hurt on the electric bill due to the "Demand charge".

-Uwe-
 

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From the utilities point of view an instantaneous demand no matter how short must be met else the whole system goes down or is partially shut down. Increased demand raises cost at least in the short term. To meet the demand sufficient capacity must exist but if it does not then the extra kw must be bought on the spot market and/or more capex in longer term. Seems reasonable to me.
 

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In some markets, the utilities charge a low price for the first N kWh per month, a higher price for the next number of kWh per month, and even more for any kWh beyond that. To me that's an utterly backwards way to run a business. A good customer who buys more of your product should pay less for each unit thereof! :D

Uwe: we call these "block tariffs". Down-here, the price dynamic that you identify is designed to recognize the limited capacity of the delivery infrastructure (i.e. the poles-and-wires) without the necessity of installing KW meters. So, block-tariffs with increasing price are a (poor-man's) surrogate for the type of demand usage tariffs that @Jack@European_Parts describes in his post - they are intended for those that have a largely predictable user consumption profile.
 
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DV52

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From the utilities point of view an instantaneous demand no matter how short must be met else the whole system goes down or is partially shut down. Increased demand raises cost at least in the short term. To meet the demand sufficient capacity must exist but if it does not then the extra kw must be bought on the spot market and/or more capex in longer term. Seems reasonable to me.

hmmm......... in simple, not-arcane words, you might be confusing how these markets handle so-called "ancillary services" and energy. I'm not sure about the specifics of the ERCOT market in Texas, but notwithstanding that these are called "energy markets", to be viable - they must also recognize the basic laws of physics!

This means that in addition to pricing kWhrs, energy spot markets must also price ("value" is a better non-arcane word) ancillary service -somehow. Or said another way, separate to generators who derive revenue via bids for energy - those generators who provide facilities for system stability to the the market ( i.e. stuff like VARs, frequency control, system-black restart etc.) must get paid too.

I would imagine that in a spot-market that is built on top of an electrical grid that is isolated from the rest of America, ancillary services would be an especially important part of ERCOTs design - particularly since the grid is prone to repetitive severe winter (summer?) events.

So yes, for Texas, I would think that how the grid (and therefore the market) responds to "instantaneous demand" does have an effect on energy (and therefore spot-price). But whether the grid survives at all to this "instantaneous demand" is probably less about how much generator capacity (KWs) was bid into the market at the time and more a question of whether ERCOT had sufficient ancillary service providers during the event.

As an example - @Uwe pointed-out how wind turbines were shut down during the storms in Texas. Wind turbines are "price-takers" in spot markets because their dispatch can't be predicted. In high load conditions, losing wind turbine Kws is far less impacting on the market than losing the equivalent amount of thermal generator KWs, because the mass of the rotor in a thermal generator also provides frequency control to the grid.

Some energy markets separately price capacity and ancillary services before the clearing price is determined (called the "ex-ante" price), but the more common method is for the Market operator to contract for ancillary services on an annual basis.

If ERCOT uses the latter method, then I suspect that lots of disenfranchised users, regulators and government agencies will be looking carefully at the basis for the market operator's contracting decision!
 
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DV52

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In the UK digital meters with time granularity (referred to here as 'Smart Meters') are being rolled out (voluntarily at present but I can see a time coming when they will be made compulsory) with the message that they will save electricity. The ability of utilities to charge usage dependent rates isn not widely shared or known, so it's a ticking time bomb.

The saving electricity message is IMHO spurious since saving electricity is done by the resident/company not by the meter - and knowing what your consumption is does not require a smart meter just a consumption monitor!

It's been estimated that the payback period for these smart meters in the UK (cost of meters and installation vs. reduced consumption) is around 40 years - which makes them unattractive on financial grounds (their reliability data suggests they will fail sooner than that).
Dave: interesting!! I tend to agree with your synopsis - IMO, the fundamental problem with "smart meters" is that they ignore the fact that end users consider energy to be a grudge purchase. it's not like regularly buying a fancy meal at a restaurant - there ain't nothing sexy about paying utility bills!! Also, many years of paying for electricity bills has entrenched our reliance on fixed tariffs.

And most importantly, despite the fact that we all complain about prices - fact is that electricity is relatively cheap (so we are not prepared to get actively involved in modulating our consumption according to price). Of course, if prices rise sufficiently, stuff might change!!:thumbs:

Don
 

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hmmm......... in simple, not-arcane words, you might be confusing how these markets handle so-called "ancillary services" and energy. I'm not sure about the specifics of the ERCOT market in Texas, but notwithstanding that these are called "energy markets", to be viable - they must also recognize the basic laws of physics!

This means that in addition to pricing kWhrs, energy spot markets must also price ("value" is a better non-arcane word) ancillary service -somehow. Or said another way, separate to generators who derive revenue via bids for energy - those generators who provide facilities for system stability to the the market ( i.e. stuff like VARs, frequency control, system-black restart etc.) must get paid too.

I would imagine that in a spot-market that is built on top of an electrical grid that is isolated from the rest of America, ancillary services would be an especially important part of ERCOTs design - particularly since the grid is prone to repetitive severe winter (summer?) events.

So yes, for Texas, I would think that how the grid (and therefore the market) responds to "instantaneous demand" does have an effect on energy (and therefore spot-price). But whether the grid survives at all to this "instantaneous demand" is probably less about how much generator capacity (KWs) was bid into the market at the time and more a question of whether ERCOT had sufficient ancillary service providers during the event.

As an example - @Uwe pointed-out how wind turbines were shut down during the storms in Texas. Wind turbines are "price-takers" in spot markets because their dispatch can't be predicted. In high load conditions, losing wind turbine Kws is far less impacting on the market than losing the equivalent amount of thermal generator KWs, because the mass of the rotor in a thermal generator also provides frequency control to the grid.

Some energy markets separately price capacity and ancillary services before the clearing price is determined (called the "ex-ante" price), but the more common method is for the Market operator to contract for ancillary services on an annual basis.

If ERCOT uses the latter method, then I suspect that lots of disenfranchised users, regulators and government agencies will be looking carefully at the basis for the market operator's contracting decision!
Maybe we are talking about different things. My comments are not about ERCOT about which I know nothing. The comment is about the salience (see i can arcane) of charges based on demand as well as usage as basis for a business model. In my country demand charges are standard for large industrial consumers and I suspect the same is true for USA. I believe but don't know for sure that small commerce is not subject to demand charges. I infer that from the type of meters that are in use.
Obviously the effect of demand change on the provider is the relative size of the user and provider. In that light the question is how large is the charge fair/effective or should be subsidized completely . I was not responding to anything you wrote but to comment which seemed imply with certainty that demand charges are inherently bad.
 
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DV52

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Maybe we are talking about different things. My comments are not about ERCOT

hmm.......... this from your original post
To meet the demand sufficient capacity must exist but if it does not then the extra kw must be bought on the spot market and/or more capex in longer term. Seems reasonable to me.
 

morris39

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hmm.......... this from your original post
Dave, I meant that utilities buy/sell power 'at market' or 'spot' rates to each other to cover unforeseen situations. This I believe was and still is standard language but what do I know. I remember the line 'See Spot run' in the first grade reader. Maybe Spot has become a dog whistle?
 

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I would imagine that in a spot-market that is built on top of an electrical grid that is isolated from the rest of America [...]
It's not as isolated as you might think:
The Texas Interconnection is tied to the Eastern Interconnection with two DC ties, and has a DC tie and a VFT to non-NERC systems in Mexico. There is one AC tie switch in Dayton, Texas that has been used only one time in its history (after Hurricane Ike).
But keep in mind that the section of the Eastern Interconnection immediately to the north of Texas was also experiencing weather that was every bit as challenging as that in Texas, meaning record demand (for wintertime) and likely didn't have much spare capacity either.

-Uwe-
 

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there ain't nothing sexy about paying utility bills!
I think it's very sexy that I can buy a kWh of electricity for less than 20 cents. Why? If I connected a generator to a stationary bike, I would have to ride my heart out for at least four hours to generate that 1 kWh. So I'd be getting paid 5 cents per hour. Not a very attractive wage.

If I were to try to produce my own electricity using generator, the fuel cost alone would be much more than 20 cents per kWh, and that doesn't even consider the cost of the generator itself, which would have to be amortized over its expected life, and that likely isn't more than a few thousand hours, meaning it would have to be replaced at least once a year if it were run continuously. Mind you, I have a generator, but the economics mean it only makes sense to use it as a backup, if/when grid power fails.
 

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It's not as isolated as you might think:

But keep in mind that the section of the Eastern Interconnection immediately to the north of Texas was also experiencing weather that was every bit as challenging as that in Texas, meaning record demand (for wintertime) and likely didn't have much spare capacity either.

-Uwe-
Thanks for the link - what a unique transmission grid your country has (in truth EVERY country's transmission grid is unique)?

Quote from HERE
Texas grid provides power exclusively to the Lone Star State. That also means Texas receives very little of its power beyond state lines.​
“There’s only a few gigawatts of what we call direct current ties with the other parts of the grid,” said Carey King, assistant director of the University of Texas at Austin's Energy Institute.​
and later in the link, this:
There is no real ability to import very much power into the ERCOT grid,” Schauer said, referring to the Electric Reliability Council of Texas, the nonprofit corporation that manages the grid's power flow.​
Just a few portions of Texas lie outside the ERCOT system.​
So, it looks like the Texas energy market is pretty-well self contained - which I guess is what the market operator needs to successfully run the clearing- price engine.

Australia's demand profile is summer peaking and even our most severe winters are mild by Texas standards. Hence we seldom have any real arbitrage opportunities between the electricity and gas markets (yes, Australia also has a separate gas spot market - which uses "ex-post" pricing).

For an electricity spot-market (like Texas) that has a winter peak and also has a high reliance on natural gas fired generation, the placement of gas in either markets must get mighty interesting!! I can only find monthly natural gas prices in the Texas market, but with gas-fired generation able to receive revenue of $9/KWhr, I would think that there would have also been a severe shortages of natural gas for heating during the snow storms !!

But this is the reality of market based transactions; when it has a scarcity value - the way to determine where the commodity should be placed is by ascertaining who values it the most - and that exercise is the job of the market clearing engine and competitive bids. Unfortunately, lots of folk clamor for free markets, but the same people often don't support the market outcome when the result means that the commodity can't be delivered because it's worth more in another place!!
 
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