Griddy matters because the market was already producing the kind of hedged retail contract critics now say regulators should have mandated. It's bill-protection product was due to launch March 1, just weeks after Uri. And the bills that killed it were an administered outcome. PUC orders kept ERCOT's price pinned at the $9,000/MWh cap well after load shed had ended, so the experiment was shut down by politics before we could see whether retail real-time pricing would adapt.
Another very useful piece, Lynne. I’m especially interested in the way real-time pricing becomes practical as smart meters, automation, and increasingly granular grid data make electricity scarcity understandable at a specific time and place. The contractual variety you describe seems essential because residential, commercial, and industrial customers obviously have very different abilities to respond to those signals. One question I’m left with concerns the “place” part of locational pricing. If a residential customer happens to live in an area where heavy industrial or data-center demand creates persistent local congestion, how should that local scarcity be reflected in the residential price? Does the market signal simply transmit the higher locational cost to everyone there, with contracts providing the protection, or is there another layer of rate design that distinguishes among customer types? This feels like an increasingly practical question as the distribution grid becomes more intelligent and more heavily loaded.
Consumers don’t think of it that way but isn’t any REP contract nothing more than an wholesale rate wrapped in an insurance policy against wholesale rate volatility? Arguably it’s just an extreme version that hedges the consumer against all volatility - at a cost. Thoughts?
Great to see your concurrence with the idea of price insurance for power. Consumers are sophisticated to understand all manner of congestion and similar pricing models and the notion of buying insurance against risks they don't wish or can't bear. Without this shift the retail market will continue to deflect or dilute price signals to the detriment of both consumers and regulation of network costs.
Griddy matters because the market was already producing the kind of hedged retail contract critics now say regulators should have mandated. It's bill-protection product was due to launch March 1, just weeks after Uri. And the bills that killed it were an administered outcome. PUC orders kept ERCOT's price pinned at the $9,000/MWh cap well after load shed had ended, so the experiment was shut down by politics before we could see whether retail real-time pricing would adapt.
Another very useful piece, Lynne. I’m especially interested in the way real-time pricing becomes practical as smart meters, automation, and increasingly granular grid data make electricity scarcity understandable at a specific time and place. The contractual variety you describe seems essential because residential, commercial, and industrial customers obviously have very different abilities to respond to those signals. One question I’m left with concerns the “place” part of locational pricing. If a residential customer happens to live in an area where heavy industrial or data-center demand creates persistent local congestion, how should that local scarcity be reflected in the residential price? Does the market signal simply transmit the higher locational cost to everyone there, with contracts providing the protection, or is there another layer of rate design that distinguishes among customer types? This feels like an increasingly practical question as the distribution grid becomes more intelligent and more heavily loaded.
Consumers don’t think of it that way but isn’t any REP contract nothing more than an wholesale rate wrapped in an insurance policy against wholesale rate volatility? Arguably it’s just an extreme version that hedges the consumer against all volatility - at a cost. Thoughts?
Great to see your concurrence with the idea of price insurance for power. Consumers are sophisticated to understand all manner of congestion and similar pricing models and the notion of buying insurance against risks they don't wish or can't bear. Without this shift the retail market will continue to deflect or dilute price signals to the detriment of both consumers and regulation of network costs.