Every "wasted $" ended up in some parasitical grifter's pocket.
Whilst these sorts of analyses are informative, they lack answers to the who profits? question.
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.
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.
To have a market, some organization needs to administer it. PJM operates transmission and facilitates a regional wholesale electric market.
https://en.wikipedia.org/wiki/PJM_Interconnection
https://en.wikipedia.org/wiki/Regional_transmission_organiza...
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”.