It boils down to the fact that markets don’t plan for things they can’t “see.” Extreme weather like this has not happened in ages in Texas so there was no price signal for it.
People also like to stomp on what the free market would actually have to do to prevent this. For a rare event, the cost of surviving it (i.e. winterizing everything) would have to be paid from revenues collected entirely during the event in order to give providers the incentive to do it. Otherwise the ones who don't would have an advantage at all other times. In other words, people might have to be paying tens of thousands of dollars this month for electricity to cover the cost.
And it's entirely possible that that isn't actually worth the expense. In that case what the market would do is raise the active price to something not that high, but high enough to curtail demand to what the grid could supply. So enough to cause some people to turn off their electric heat and drain their pipes and take a vacation to Cancun because it's cheaper than staying and paying that electric bill.
And then you don't get shutdowns, and that may actually be the most efficient solution, but people don't like it and put pressure on regulators to prevent prices from spiking that high. But there goes your price signal telling the market to winterize things.
But it causes electric cars that avoid the carbon tax to have a market advantage over gasoline powered cars, so more people buy those. It causes non-carbon power generation methods to have a market advantage, so more people build those. As the infrastructure gets built to replace carbon, the amount of the dividend declines, but only because people are paying less in carbon tax because everyone is burning less carbon.
They did it in British Columbia.
I’m a big fan of this approach, which is actually bipartisan-ly designed.
Check the video in that link.
A carbon tax is regressive. All energy and resource taxes are regressive, since the rich can easily afford more expensive energy. Carbon restrictions are also regressive on a macroeconomic global scale as poorer countries are often more reliant on older and simpler fossil fuel technologies. The only exceptions there are countries with a lot of hydroelectric resources (which is also an old proven tech). A stricter international climate accord would severely punish or even bankrupt many poorer countries, while richer countries would be able to afford newer "green" energy or nuclear power. Both of these are too expensive and technically sophisticated for early stage developing nations.
I really think just investing heavily in the build out of alternatives is a far better strategy and the only non-regressive way to do it. Build and scale the new stuff until it can compete on price with the old stuff and then set the market loose. Since the new stuff is now cheaper, the market will replace the old stuff. Meanwhile as we use more fossil fuels they are getting more costly to obtain, so it's really when the two curves intersect that change will happen.
Strange that every other state in the US affords this, but somehow Texas can't.
I highly doubt this. We had the same thing happen in 2011; in theory the increased rates should have paid for winterization then, especially given how another similar storm would have put those who had winterized properly at an advantage in providing a limited resource with increased demand. That's especially true given that various figures put the cost of winterizing gas wells or wind turbines at 10% or less of the cost of the system without it [1]. But that didn't happen. It seems to me that gambling that your plant can produce during increased demand with no additional investment has worked out well for many companies [2]. To me that signals an incentive for power produces to actively work _against_ winterization regulation, as you could potentially make record profits on the backs of others' misfortunes, and if no one else winterizes you have less sure competitors to potentially drive the price down during increased demand.
> So enough to cause some people to turn off their electric heat and drain their pipes and take a vacation to Cancun because it's cheaper than staying and paying that electric bill.
This is predicated on the assumption that people were able to leave their houses, don't have pets / elderly family members that can't be moved, that they could all get flight tickets, that airlines were still actively running, that airline tickets wouldn't see surge pricing due to demand, and so many other factors.
I killed everything in my house save for my laptop to work as best as I could, my fridge, and my gas heat turned down to 62. At the highest rate they posted I would have been paying $180/day just for those. I can afford that, being a two person household who both work full time at significantly above average rates for the area. I would wager most people around here would not be able to pay ~$700 over 4 days just for a minimal amount of power on top of other storm damage costs, nor would it be less expensive or even possible to pack up and leave. Then they would be faced with "do we try to go without water for 4+ days" or risk freezing pipes, or paying hundreds of dollars just for the luxury of not freezing.
Maybe I'm cynical, but I believe if the options are "pay an extra-ordinate rate" or "potentially freeze to death" then the system itself is broken.
[1] https://www.texastribune.org/2021/02/20/texas-power-grid-win.... [2] https://www.houstonchronicle.com/business/article/jerry-jone...
People are already receiving such bills:
https://www.forbes.com/sites/jonathanponciano/2021/02/20/170...
Two problems:
1. Most consumers who signed up for such plans had no awareness of the risk they were taking. Sales people would have tried to hide it.
2. Many such bills will prove uncollectible, bankrupting the middlemen involved.
A bailout is surely coming:
https://www.dallasnews.com/business/2021/02/20/griddy-custom....
> El Paso Electric said they always try to prepare for the future and after a winter storm in 2011, the utility company worked towards replacing and upgrading their equipment. Many generators now have antifreeze protection.
* https://kvia.com/news/el-paso/2021/02/15/el-pasos-not-seeing...
A little forward planning allows your business to keep on chugging in the face of (foreseeable) challenges.