On Power Markets, Snow Storms, and $16,000 Power Bills
22nd February 2021
Once or twice a year, a company called Griddy makes headlines for the insanely high electricity bills incurred by consumers in ERCOT, the Electric Reliability Council of Texas. This traditionally happens during the hottest days of the Texan summer, when the world of wholesale energy traders and grid operators are biting their fingernails around near-miss blackouts — days which usually come and go with most consumers remaining blissfully unaware of the creaking and straining grid powering their air conditioners. During the week of Valentine’s Day 2021, the headlines were caused by an extreme cold snap instead of an extreme heat wave, but the market dynamics remain the same: too much demand and not enough supply, with prices held constant at the artificially imposed price cap of $9000 per megawatt hour (MWh) for days on end. This particular consequence of the ERCOT blackouts has predictably caused politicians and pundits from both sides of the aisle to scream foul, but the reality is that the “bad guys” in this situation are not so clear cut. As an entrepreneur and CTO in the wholesale energy space who’s worked with major ERCOT players (as well as in several other global RTOs) for over three years, I’d like to offer some nuance and context for consideration.