What the U.K. and Texas Energy Crises Have in Common
For one thing, their pricing mechanisms reward and punish the wrong behaviors, frustrating the shift to renewables.
Times are changing, but our pricing incentives aren’t.
Source: Bloomberg
Back in February, thousands of Texans faced astronomical power bills in the aftermath of a sudden winter freeze. They had signed up with Griddy Energy LLC, a power provider that passed on wholesale rates directly to customers. These are often cheaper than traditional residential utility rates. Except in an emergency. Beneath the recriminations was a straightforward truth: Those unfortunate customers had been briefly exposed to the unvarnished, parabolic price of energy in a supply crunch.
Energy is life, yet we tend to have a shaky grip on what it actually costs. More important, the whole concept of energy’s “cost” is often distorted or incomplete.