> Free markets often fail to adopt low cost protections to tail events.

Especially when they can foist off the costs of black swan events onto their customers, investors, insurance, and/or the government. In the mean time, they will optimize for profit in the average case.

I can't think of a reliable mitigation against "heads I win, tails you lose" such as seen in a privately owned rent-seeking utility, but clearly the existing system is going to fail more and more.

There are certainly valid criticisms of government operated public utilities, but in places I've lived under their umbrellas there weren't any life-threatening fiascos due to under-investment in expert-recommended tail risk mitigations. Maybe the operating cost of power / water was more than elsewhere, but I didn't notice (or have the ability to shop around).

A market approach may be to let utility customers buy service with a distribution of costs including claw-backs if there is a utility failure. Such a contract may incentivize utilities to install whole-house UPSs for customers who have a "$500 per hour of downtime" service contract. One can imagine the government mandating that in exchange for the last-mile monopoly and access to customers you must offer a full range of SLAs (ranging from a griddy-like "you pay for wholesale price + vig" to "you pay more but have a fixed cost but may have service interruptions" to "you pay substantially more but get clawbacks if the utility fails to meet delivery SLAs".

Likely over the next decade we'll see a continued 3rd worldization of more public goods such that those who are wealthy can just buy a powerwall and those who aren't will freeze / boil every 8-15 years.

A less markety approach is to operate the utilities as a quasi-government (IE not-profit seeking) organization with clear goals and governance; such things have worked in the past and also failed in the past and lots of fair-weather zealots will complain that it is government overreach.

There is every reason to predict that we will continue to send the cost of failure to the government/taxpayers and send profits (plus what should be normal infrastructure upkeep) of normal operation to whoever is well enough connected to operate the utility.

I don't see how the free market could have ever succeeded here. Even if it somehow accounted for events of the last week: the lost lives, damaged properties, and economic impact, it was billed as a once-in-100 year event.

Which company is going to take a hit to their profits each quarter so they can prepare properly? The companies who don't will be more competitive and successful right up until a freak event actually occurs. And if that happens, the absolute worst case is the your under prepared company goes under. Unlimited upsides and very limited downsides.

If generators were required to be winterized in order to access the market, that would have solved the problem.

No individual company will take the profit hit without a regulation forcing all the actors to do it.

I agree with your point, but want to point out that this last happened in 2011, and before that in 1989. Certainly not a 100-year event, and likely to become more frequent.

Having a power grid that is heavily reliant on burning fossile fules is a pretty absurdly bad externality too.

What if I've got a prepper bent and am OK with losing power for a few days in a 1:100 year event? Can I still get cheap, slightly unreliable power?

Not to make light of the events in Texas - it sounds scary and they need to be prepared for next time. But the answer isn't automatically "they should have had a gold plated the grid!". The answer might be "they should be have been prepared for a few days without power in extreme conditions".

Every new 9 gets added to 99.9...% reliability figure costs a lot more than the 9 before. At some point, it is more effective for rare events to be handled on a case-by-case basis.

Your personal value for reliability isn’t relevant. The electric grid is providing power for hospitals with back up generators and office building which don’t. The value of each of those 9’s to society and the overall economy is what matters and business being forced to shut down lose vastly more money than it would cost to prevent this issue.

The market based solution is to add a very large fine for blackouts on a per customer bases. Grid operators can still select how many actual 9’s they want, but the externalities for doing so are priced in.

They are relevant. The electrical utilities could load-shed based on priority, so that places that need highly reliable power pay more and get special guarantees. Technically infeasible on a house-by-house basis, but they could do it for hospitals and such. They probably already do.

Your solution will cause power prices to go up. I'm sure a lot of consumers would be happy with that trade, but why should the ones who are unhappy with it be dragged along for the ride? There is no need to force the grid to provide reliable power to people who won't pay for it.

I'm not sure that works because the operator can just go bankrupt in that situation?

This is a week about every 10 years best case, right now, where I’m at (near Austin). We lose water for twice that long every 5 years. The reliability is probably less than 99% for power, and 95% for water.

Fellow Austinite here. To what events are you referring? I have no recollection of multiday power or water outages in the last 10 years.

We had a boil water notice that lasted for a couple weeks after bad storms just a year or two ago, and now this one. I don’t think we’ve had power issues like this recently.

Do you live near a hospital? I have seen reported in some news articles that people who live near hospitals have been less affected.

thechao is probably referring to the 2011 outage - dunno if that was multi-day though

Based on what I've read, my understanding is that the separate Texas grid and ERCOT exist because Texas politicians wanted (and still want) to avoid federal regulation. The parts of Texas that were not on the separate Texas grid, i.e. El Paso didn't lose power.

Are you saying that the rest of the US does not have a power market with appropriate regulations? Because as far as I can tell, this crises could have been completely avoided if we didn't have our own isolated grid.

As far as I can make out, this narrative is simply not true, at least not with regard to power generation. Texas is subject to the same NERC regulations as the rest of the U.S. and Canada.

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

That they are subject to some regulations doesn't mean they're subject to all.

https://www.nytimes.com/2021/02/21/us/texas-electricity-erco...

> One example of how Texas has gone it alone is its refusal to enforce a “reserve margin” of extra power available above expected demand, unlike all other power systems around North America. With no mandate, there is little incentive to invest in precautions for events, such as a Southern snowstorm, that are rare.

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

This makes sense, though I'm still not sure I understand exactly how it works. Thanks!

If the externalities are on the national level, and the fed was seeking to regulate and own the responsibility, whole texas sued to foist them off, who has responsibility for the externalities?

Why do you think electrical regulations in Texas have anything to do with gender studies in Pakistan?

Dude, this might work on reddit. But not here.

Give it up.

No, they're not interesting, which is why they've been downvoted.

A car crash is more interesting than an empty road, it doesn’t mean we should encourage them.

Did he count all the deaths caused by fossil fuel plant particulate emissions and all the future deaths caused by right wing extremists using deadly force to stop migration to rich countries?

I wish you could have replied to his original comment. Perhaps he would have an answer.