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Comment by lukev | Hacker News Reader

The original idea behind this is sound. Because production and consumption must net to ~0, from the grid's perspective cutting load is just as valuable as providing generative capacity.

Imagine you own a factory that typically runs 24/7 and is part of the system's base load. There is a material cost for you to shut down production. These structures were set up to make it economically viable to have these types of installations shut down in extreme events and function as "virtual power plants" (remember, lowering base load is physically and economically equivalent to providing additional generation.)

So far, this kind of makes sense. But unfortunately the same framework can also be applied to cryptocurrency operations, where it really does not make intuitive sense. Largely, IMO, because Bitcoin is so piggish for energy for so little societal value to start with.

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You achieve similar results by simply charging such customers current market rates. Nobody is going to be mining Bitcoin while paying 2.50$/kWh.

That’s the objection, it’s simply a waste of money.

It's so weird because I thought the whole point of ERCOT was to be a market and use market forces to solve everything.

So why are they paying bitcoin miners to turn off, rather than just charging them market rates at all times and letting them decide for themselves?

I feel like I'm missing something here.

The gap between actual unfettered market forces and what gets implemented in American capitalism is where the grift happens. IE, ostensibly set up a free market to satisfy the ideologues but make sure there are carveout deals so cronyism has room to hand out favors.

Don't forget the guy in 2021 who told investors he will keep the prices as high as possible for as long as possible during that winter storm.

The last couple years of evidence suggests that keeping the grid up requires a certain amount of central planning. On one hand, the frequency must remain relatively stable, globally. On the other, consumers don't want to deal with every fluctuation of the price (as they found out when they were exposed to the spike prices during spring '21). On principle, Texas is going to make sure that the energy sector is taken care of financially, so we end up in the situation we're in: Advertise the grid as market-purely as you can, engage in just enough planning to keep it up and the money flowing.

Electricity markets are not just spot prices. There's sub-markets for being available to respond to emergencies.

The UK system: https://www.nationalgrideso.com/industry-information/balanci...

It seems you'd be eligible for "quick reserve" if you could turn on or off >1MW of response within one minute. Ideal for batteries. Includes a "standby" fee paid hourly to cover having the system "armed".

(It seems unlikely that either the bitcoin operation or their electricity meter could manage sub-minute response times to changes in prices alone? I'm not exactly sure how metering and payment works at grid level and how granular it is)

It certainly could

The Texas and UK power market are actually very similar in construction and operation.

You are missing something. That like all neoliberal idiots who claim to use "dur markets" as a catch all solution, they are dishonest bad faith actors looking to filter money and power to their friends, not make anything better for anyone. I imagine you'd find quite easily the tax payer money is filtered to companies they own or are friends of.

This is a pretty common scam among neoliberals that I don't know how it's still a mystery to people. "Dur freedum markets good!" or whatever populist lies to get elected then crank up subsidies to your friends. A tale as old as time.

Right up there with "defund state institutions and then point to their dilapidated state as evidence of their inherent failure". Nhs in the uk for an easy example.

Anytime government assets go to private hands there’s always some back room deals going on. Though it strange seeing neoliberal used when it’s usually the conservatives pushing this agenda in the US, that’s what it’s called.

https://en.wikipedia.org/wiki/Neoliberalism

You don’t get the same outcome.

Consider the payment as the cost of maintaining demand during periods where you don’t want it.

It's like a factory that can only produce 100 widgets each week, nothing more or less. Ideally you want to always sell 100 widgets each week (supply = demand). You could build a smaller factor that only makes 60 widgets, but the cost per widget would be 50% higher and at market rates you can't make enough money to justify the investment.

So what you do is build the 100 widget factory and you sign up a customer who will always buy 40 widgets each week, and the remaining 60 widgets you sell to smaller customers.

If suddenly the demand from smaller customers hits 90 widgets one week, you don't want to just cut off the 40 widget customer and say "tough shit", because they may not come back and you're stuck with 40 widgets each week you can't sell.

So you pay them money in exchange for accepting a lower supply of widgets that week.

Even with the payments, net-net you’re better off because during the 50 weeks per year when smaller customers only buy 60 widgets, overall your set up is more efficient.

“If suddenly the demand from smaller customers hits 90 widgets one week.”

Demand and price are linked. If you’re selling 40 units a week at 10$ and demand increase to 90 units @ 10$ that doesn’t force you to sell at 10$, you can spike prices to 50$ and suddenly people aren’t trying to buy 90 units.

But this is demand like residential A/C. It's not good business to deny those customers electricity.

There’s no denying involved in setting prices higher.

Electrify customers pay a premium to have a fixed rate. Customers swap to market rates because they can save a little money on average and significantly more if they delay use to cheaper periods. Such as plugging in an EV when you get home but only charging it from 12pm to 4am or whatever.

If prices were perfectly liquid and symmetrical, sure. Unfortunately they're not and the system is pretty complex. There's a bunch of different ways to purchase energy and not all of them are sensitive to realtime price.

Establishing a separate mechanism to compensate "virtual" generation (via load reduction) works no matter what pricing structure I use for my typical energy purchases.

I have a friend who works in the energy industry specifically targeting power grid management.

It is far easier for power companies to manage power loss for things with consistent power usage (low variance) than high variance / inconsistent power loads.

Businesses tend to be very consistent, even if their power draw is high, like manufacturing or hospitals etc.

Residential power tends to be more variant and harder to fine tune for because it can spike quite suddenly in unexpected ways and tends to add more base load over time.

Therefore, it’d actually make more sense for power companies to buy people homes in other states if lowering base load is a concern, since residential is where all the major issues are for load balancing, no?

Would it help if the state were to provide tax incentives for in home battery backups?

A lot of states are looking into large battery facilities specifically for frequency regulations.

I kind of wonder why there has been so much push for consumer solar / battery over neighborhood solar / battery projects. At least in Texas, there is so much empty land, it seems like it would be more effective to 'imminent domain' some land or leverage existing right-of-ways for solar array + battery storage, rather than putting the burden on individual homeowners to purchase what is effectively community infrastructure (if we were allowed to sell power back to the grid).

I was talking utility level storage. My lens is that utility/industrial level solar + storage is where most of the action is. The retail stuff is good for construction and local jobs and the feel good homeowner play.

Not yet anyway. While batteries are interesting, they do start on fire once in a while. We think with correct engineering that risk can be mitigated, but we shouldn't roll things out too fast just in case it really can't.

> it’d actually make more sense for power companies to buy people homes in other states

No, because of scale. A large factory is one entity to deal with. Moving just one out of state is possible, but meaningless as even though houses are significant overall you need to deal with many houses before an actual difference is made, while if you can deal with a factory you can make a large difference for the same amount of effort.

A factory/hospital is also easier because they probably have a backup plan. if there is any possibility that the power will go out they are likely to have made backup plans. You are overall cheaper than their backup plans, but you can probably make them a deal where they run their backup plan instead of connecting to you. Since they already have the generator it isn't a problem for them to use their generator on your busy days, and so a small discount makes it easy to work with the factory than a home owner who is probably thinking about friends and family they are moving away from.

The power company has a list of who these deals are with and the priority order. I know of one factory with a coal boiler from the 1800s, and a generator from then 1920s - the whole is very inefficient and takes a full day to start up, but the power company makes it worth while to keep everything operational because every 5 years they can power it on and supply the whole town (at 5x the normal cost of power from the plants they run all the time). Meanwhile there is a store near my parents that is running their generator every hot day - a modern diesel generator when sized properly is not a lot more expensive than grid power so the store doesn't need a big incentive to use it instead of grid power.

Of course all of the above is for exceptions. Where I live now we have built far more wind than needed most of the time, and as a result 80% of our power is renewable. There are very few days when backups are even needed.

You could certainly make an argument that zoning needs to be "power neutral": can't zone any houses or businesses without zoning an equivalent power plant. Very SimCity.

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