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Comment by jcampbell1 | Hacker News Reader

I think this is regulatory lag. Most peak power is provided by NatGas these day, and NatGas is cheap. If Lithium-ion made sense at the wholesale level, then power companies would do it. I'd bet this is because some regulatory commission decided on rates for peak/non-peak based on information that is no longer relevant.

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Natural gas may be currently cheap, but power plants are still pretty expensive. Peaker plants amortize their construction and maintenance costs across much a smaller amount of time, so peak pricing will never go away.

Also, I'm not sure natural gas is all that cheap from a power generation perspective. Combining page one of this: http://www.eia.gov/naturalgas/monthly/pdf/table_03.pdf and page 25 of this: http://www.fas.org/sgp/crs/misc/RL34746.pdf suggest that natural gas is still 2x more expensive than coal per BTU.

Commissions don't decide peak power prices, the marginal producers of power do. And, yes, natural gas is a large portion of the power stack, but peak days (which only happen a nominal number of times per year) are driven by plants that come online for short periods of time at high marginal costs.

Power companies just pass through market rates, they are mostly ambivalent to driving down rates as they just tax tolls on each transaction.

Not sure where you're describing, but it varies by jurisdiction. In California, a commission called the California Public Utilities Commission (CPUC) sets electricity prices charged by all the major operators. See for example:

http://www.cpuc.ca.gov/PUC/energy/Electric+Rates/

Of course this is subject to a long-term constraint that rates must be sufficient to support generation and wholesale purchase... but there's no direct "pass through of market rates" on an hourly, daily, or monthly basis.

That seems right. Batteries need a lot of capex though: maybe easier for a hotel than a utility.

Natgas may be cheap but utilities are not in a particularly competitive market. So it's possible this saves money basically by directly taking a chunk out of utility profits which are pushed highest during peak demand.

Modeling the organizational behavior of monopolies as a steady state, or an example of rationality, is a perilous process. Many utilities are starting to flirt with it, but they really do think in decades -- if you can call their deliberations thinking.

In the meantime, nimbler companies can make a lot of money filling a market need while taking a little more risk.

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