[ahepp]

>Those that chose Griddy, chose higher risk, which comes with high potential rewards but also high potential losses

When I lived in the poor part of town, "energy deregulation" companies were always coming around, aggressively trying to get me to sign up on the spot.

They never talked about risk, they just told me I could sign here to save $100s on my power bill. I asked them about the details and they just lied through their teeth.

This was in MI, not TX. Maybe Griddy is different. I suspect they farm out signup to the same type of contractors.

I think the idea of consumers responding to energy prices is nice, but has some pretty glaring issues.

How many consumers are aware of hourly energy prices? How many on deregulated plans even understand that they pay more when usage is high?

Can they react fast enough to changing prices? Leaving a light on during vacation should cost you some money, but it shouldn't wipe out your 401k.

This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley.

At the end of the day, it still comes down to losing power or losing 5 figures of cash that you probably don't have. Most people aren't in a position to be "homo economicus" when it comes to heating their home in a blizzard. It doesn't solve their problem to give them a choice between losing power, or going bankrupt. Many will choose to lose power, and die running their car in the garage just the same as if they had a blackout.

If price sensitivity causes someone to set the AC on 80 the hottest day of the year, that's great. But expecting consumers to handle tail risk is a silly idea.

I suspect you could get 99% of the effect by only passing a small price window to consumers, and managing the tail risk collectively.

[JumpCrisscross]

> the idea of consumers responding to energy prices is nice, but has some pretty glaring issues

I am a high-income New Yorker. If this were available to me, and if I could (a) set a cap past which I lose power or, preferably, (b) hedge by buying power call options, I’d take it. (Depending on the cost of (b).)

That said, it’s a complicated financial product. We don’t sell derivatives, structured products and alternative assets to the poor. (Robinhood et al aside.) Power shouldn’t be an exception.

[Skunkleton]

It’s high risk, low reward too. The upside is a small reduction in my monthly power bill. The downside is ...this. If you want griddy+calls, you can get that already in the form of a traditional electricity service.

[tunesmith]

Phrased that way, it sounds like it is exactly the opposite of insurance. Pay a little less when times are normal, in favor of a spectacular lack of protection when times are hard.

[bradleyjg]

The phrase I’ve heard for this style of bet is “picking up nickels in front of a steamroller.”

[curryst]

My mental image of a steamroller is slow, so they're dodgeable. I don't think I've ever seen one in real life, come to think of it, so maybe that's just me.

I would have called it "Russian roulette". High reward, high chance of an unavoidable catastrophic loss.

[Skunkleton]

Yep, that is the point. Usually, there is no problem picking up the nickles. Every once in a while, you trip, bonk your head, pass out, then do your best impression of a sheet of paper.

[AnthonyMouse]

Except that there are ways to get the protection somewhere else, in ways that are potentially advantageous.

The most obvious one would be to just disconnect your house from the grid whenever prices exceed some threshold that only actually happens once a decade.

Even if that means you go stay in a hotel, doing that once every ten years for thousands of dollars in savings over the same period could be totally worth it. And there are also even less inconvenient alternatives, like buying a generator for less than you save in electricity and using it during price spikes, which means you also get a "free" generator to use during ordinary power outages.

Meanwhile it helps the grid because people who are willing to do this voluntarily remove load during crunch time and prevent the need to do rolling blackouts that unexpectedly freeze people's pipes.

[tunesmith]

I think there's one other aspect though which is similar to insurance - you can't time the "bad times" and they can come at the most inconvenient times, including when you do not have the wherewithal to trigger your various backup plans.

Generators automatically notice when the regular power goes off, but I don't know if they can automatically notice when prices rise above a certain threshold.

[nine_k]

I'm also a reasonably well-off New Yorker, and I made the switch.

My apartment does not rely on electricity for heating; it's steam-based. Were it electricity-based, I won't switch.

But in the summer the price of electricity is like 50% of what plain Con Edison used to offer, and it's the time when power consumption peaks because of the running of air conditioning all day.

The reported generation mix is low-carbon, about half of it comes from nuclear plants, some from hydro and solar, about 1/3 from gas-fired stations, apparently zero from coal-firing stations.

So, for me it's a win-win so far.

[mint2]

I’m assuming Griddy didn’t allow users to set a cap. That should have been illegal even in an unregulated market.

[selectodude]

You can hedge power spikes, it’s the normal fixed cost pricing. Costs a bit more per kWh until it doesn’t.

[twunde]

TX is __slightly__ different in that its fully deregulated and there's simply more knowledge about REPs/ESCOs and their pricing (because they customers HAVE to choose a REP). Also in what other state do you see billboard ads for REPs?

What is genuinely sad is that Griddy has a "price-lock" (ie a fixed rate) for the summer, which is exactly what you're talking about regarding tail risk. They just don't have it for the winter, which is normally the cheapest time in TX and clearly couldn't set up a decent fixed rate quickly after they understood the implications of the polar vortex. What they should have done is sent an email to their customers offering a fixed rate for the month even if it was expensive.

[leereeves]

I'm not sure they could have offered a reasonable fixed rate for the available power. When the federal DOE authorized the supply of emergency power that didn't meet the usual regulations, they required the price to be at least 10x the normal price ("no lower than $1,500/MWh"). I haven't been able to find out how much of the power supply that applied to, but at least some of the power during the disaster was legally required to be sold at outrageous prices.

> ERCOT shall ensure that such Specified Resource is only allowed to exceed any such limit during a period for which ERCOT has declared an Energy Emergency Alert (EEA) Level 2 or Level 3. This incremental amount of restricted capacity would be offered at a price no lower than $1,500/MWh.

https://www.energy.gov/sites/prod/files/2021/02/f82/DOE%2020...

[baldeagle]

It's ok... the Texas Public Utilities Commission decided to set the max rate to $9,000/MWh making the polluting power seem cheap by comparison.

I've read the Dept of Energy doc, and I think they were trying to make sure that power companies could pay for the pollution offset credits after the fact. Also, since Texas has a soldi market based power system, they wanted to make polluting power the least desired. Little did they know.....

[ashtonkem]

My understanding is that the energy markets started reacting to the polar vortex with days or weeks worth of warning, meaning that Griddy shouldn't have been that surprised that something was coming. Therefore it appears like Griddy was asleep at the helm, uninterested in doing anything about it, couldn't negotiate/hedge in time, or just internally confused.

[soylentcola]

Can't you say this for most things, though? People talked about the likelihood of a new contagious respiratory viral pandemic for years. Plans were drawn up, warnings were made, and the response was mostly "uh huh, that would suck for sure". Same could be said about anyone who's ever had their data lost to malware or hardware failure and didn't have a proper backup in place.

On some level I think it's human nature to underestimate some types of risk (and the nature of businesses to optimize for profit based on an understanding of this nature).

[ashtonkem]

There’s a big difference between “there might be a pandemic at some point in the indeterminate future” and “the price of 7 day gas futures is rising rapidly”. There’s also a difference between “Texas’ grid might fail in a future freeze” and “there will be a bad freeze next week”.

It doesn’t make sense to try and draw a parallel between a bad hypothetical that might happen in some indeterminate future and a negative possibility that will either come to pass or fizzle within a very short time horizon.

[readflaggedcomm]

The article says they told their customers to switch away. What it doesn't mention is that this was over a weekend, and many people couldn't manage the switch before the weather hit.

[mindslight]

I was thankful my elderly father lived in a town with a municipal electric company, so all of the spam calls he got about "lowering his bill" could never go anywhere. Obviously there's some hidden catch, otherwise they wouldn't be spamming!

I think the Griddy scheme is in the process of destroying itself, as it becomes apparent how many people won't be paying their bills, either through bankruptcy or populist legislation. Despite not seeming so on paper, Griddy itself has significant long tail risk.

A great way to hedge while having Griddy would be to make a deal with your neighbor to run an extension cord when the spot price gets too high. Sleazy, but what isn't these days.

Of course such arbitrage just pushes the market as a whole towards time of use pricing, which isn't a bad thing as long as the unreasonable pathologies get worked out.

[upbeat_general]

Now this is the best comment I’ve seen in all the treads about the power outages.

[thinkcontext]

As far as I'm aware Griddy's product could only be sold in Texas. Plenty of other states have deregulated residential electricity markets, all of the ones I am familiar with would not allow residential customers to sign up for totally unconstrained rates.

I'd suggest Texas jettison its market fundamentalist politicians and instead elect ones that advocated for proper regulations prior to this event.

[nicoburns]

> This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley.

It's not the answer yet. But I'd be very surprised if it wasn't the norm in developed nations in 10-20 years. It's an obvious response to inconsistent generation from renewables, and the technology itself is straightforward.

[pintxo]

Also, how is this going to be cost effective? I just had an offer to include smart home capabilities in my new home. Some 16k EUR for a very basic installation, with only a tiny part of the home being fully automated. My electricity bill is less than 1k/a on a fully renewable energy contract. using AI smart home technology seems to be far from an economical solution as of today. Prices for smart homes would need to fall 1-2 orders of magnitude for his to start making sense.

[nicoburns]

> Prices for smart homes would need to fall 1-2 orders of magnitude for his to start making sense.

I mean, this seems pretty likely to me over a timescale of a few decades. Smart homes are currently a niche product for the rich. They've barely started on their journey to being mass-market products. That will look like the products you are already buying being smart-home capable because that's considered standard.

[phicoh]

I don't see how that would work. Suppose there is no wind for a couple of days, do you expect homes to shutdown everything and wait for wind to return?

Solar in a desert is easier, if you only have to cover the night then install a big enough battery. But a battry in every home is probably less efficient than a huge battery next to the solar panels.

So most likely, renewables come with storage. And the smart grid idea with mostly fade. Possibly with the exception of car chargers that charge faster or slower depending on conditions.

[ajford]

The solution for things like this is a multi-facet power grid, with renewables, nuclear, and (small ammounts of) fossil fuels, paired with grid-scale energy storage.

For example, the pumped hydro station in Wales [0] can store up to 9.1GWh and can push 1.8GW peak, with a spin up time under a minute.

Systems like these can serve both as buffers until fossil fuel or nuclear reactors can spin up to peak in the even of wind/solar shortage, and can even serve as overnight generation to replace solar if large enough (given the usually much lower demand at night).

If each state was required to implement their own (presumably smaller) grid-scale storage this would have the benefit of removing a single point of failure and spread the cost. A construction project of this scale would also serve to create hundreds or thousands of jobs in various areas, stimulating the economy.

Having grid-scale storage would be drastically improved with a smart grid, since it would have much more real-time data on power demands and allow more seamless management of capacity.

[0]: https://www.youtube.com/watch?v=6Jx_bJgIFhI

[brandmeyer]

> I suspect you could get 99% of the effect by only passing a small price window to consumers.

I've been thinking about this problem for some years now, since I first became involved in microgrid controls. Rather than change the dynamics by limiting amplitude, I would change the dynamics by adjusting information latency.

Schedule customer pricing based on the day-ahead market clearing price instead of the spot price. End-customers are still exposed to price fluctuations for both good and ill. But now they can make decisions based on them well in advance. Momentary interruptions in communication no longer render the customer blind to the market price. Similarly, low-latency communications are not required for smart devices to take advantage of price changes. The most volatile portion of the market risk is also still borne by the utility.

[mattuk89]

I'm on the "Agile Octopus" tariff in the UK and this is broadly how it works - the next days prices are available around 4pm the day before, giving you time to plan. There is also a cap of 35p/kWh (the standard fixed rate tariff is 15p/kWh for comparison) which limits the downside risk somewhat. In peak hours during the winter it regularly hits the cap. Bit of a halfway house between pure time of use and fixed tariffs.

[billylindeman]

"This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley."

I actually worked on a system like this https://powerley.com it's based in the Detroit area. The energy grid is going to face growing demand / supply issues over the next decade and I do believe systems like this will become more important to manage load.

[ardy42]

> This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley.

It also sounds awful. It would objectively be a regression from reliable electricity to unreliable electricity, like in an undeveloped country.

The only thing such a technology would do is give the power companies a BS way to shift the blame for their planning fuck ups onto consumers, because technically it would be the consumer's equipment that killed the power.

[nickysielicki]

> This article seems to suggest the answer is a fully automated smart home, with some kind of AI to intelligently manage your power usage. Sounds awesome, but I don't think that's ever going to be a reality outside the valley.

This is shockingly myopic.

[jjeaff]

Not myopic, just overly complicated. Huge strides in availability could be made by simply having smart meters that allow the power company to adjust the maximum draw before the breaker kicks.

Rather than cutting off all the power for half the city, cut off half the power for the whole city. That way people could still have a small space heater and some lights but not run their dryers and who knows what else.

[Anon1096]

The existence of Griddy is unrelated to energy deregulation. I keep seeing that term thrown around but no one using it seems to know what it means.

Griddy is simply an energy provider you can choose to hedge your bets and save money if you are smart. Plenty of people using it shut off their power or switched providers when they were informed of the incoming price surge. That some households ignoring the warnings shouldn't be a reason a service like Griddy can't exist.

[ardy42]

> Griddy is simply an energy provider you can choose to hedge your bets and save money if you are smart. Plenty of people using it shut off their power or switched providers when they were informed of the incoming price surge. That some households ignoring the warnings shouldn't be a reason a service like Griddy can't exist.

It's not reasonable to expect households to monitor their electricity rates or alert emails that closely nor be prepared to drop everything to switch providers at a moment's notice for an entirely unexpected reason. I know I don't immediately read every email I get.

An even if someone was monitoring that closely, or was ready to jump, there's no guarantee they'll be able to switch:

https://6abc.com/griddy-gridy-texas-power-bills-what-is-ener...:

> In a rare move Sunday night, Griddy sent out an email to all 29,000 of its customers, urging them to switch to a different provider. Thigpen says she tried Monday morning, but no one was taking new customers....

> We reached out to a few providers here in Texas. They are not taking customers. Some say they may accept new customers by next Wednesday, when they say the weather has improved. That was the earliest 'maybe' answer we could get.

[ryanmarsh]

Griddy didn't have to beat the bricks like most REP's in Texas. Smart consumers aware of the risk beat a path to their door. Unfortunately, as with anything like this, the followers and fools soon showed up (reminiscent of $GME) and a good thing somehow suddenly became "a scam".

[GCA10]

I'm not sure we can really say "smart consumers aware of the risk." Isn't it more like "Opportunistic customers who hoped the risks were immaterial beat a path . . . "

Out of morbid curiosity, during a long drive this weekend, I listened to 20 minutes of an AM radio guy's pitch for some retirement annuity system that sounded quite sweet at first. As he kept talking, though, I realized that he was being very evasive about what happens if you die early. Connecting the dots - he keeps all your assets. No survivor benefits at all.

I used to do financial investigative reporting. I was looking for the catch. And it nearly glided past me. Ditto for disclosing the full details about the maximum caps on your electricity charges.

These promoters are masters at smooth, low-candor discussions of risk. They're what make the pendulum keep swinging back and forth between deregulation and re-regulation.

[rowland66]

I think that it is called an immediate annuity. It is a standard insurance product that offers protection against outliving your assets. You pay a lump sum in return for a guaranteed income as long as you live. Yes, if you die early, the insurance company wins, if you live longer than expected, the insurance company looses.

I think these are more common in Europe where people will often take a lump sum pension payout at retirement, and buy an immediate annuity.

[curryst]

Isnt a pension already designed to be a payout until you die? What's the advantage?

[ryanmarsh]

I consulted for a large existing REP to help analyze the market and suggest strategies for launching their own Griddy competitor brand. So when I say "smart consumers aware of the risk" that is exactly who the research showed the customer was. The initial customers were people perfectly capable of the arbitrage. They even had customers using IFTTT to turn up the thermostat (summer months) when prices would spike (in 15 min increments).

I literally built a prototype competitor product to Griddy and I'm downvoted for explaining exactly how this shit works.

[talentedcoin]

I didn't downvote you, but comparing this situation to what happened with GME (as in your previous comment) is, at best, a stretch. At least with GME one could argue that people signing up for margin accounts to buy stock options should know what they're doing ... which is maybe a different subject ... but as others have indicated in this thread, a lot of providers like these employ some fairly aggressive/shady strategies to get consumers to sign on, and don't candidly discuss worst-case scenarios like these.

[alasdair_]

IFTTT doesn’t seem like the best solution to something that costs you an enormous amount of money if it fails. especially in a situation with potential power outages killing the box you were using at an inopportune moment.

[bumby]

Can you elaborate on how the research was conducted and specifically how the risk was measured by consumers?

There’s an awful lot of research that implies humans are very poor estimators of low probability / high severity events

[ryanmarsh]

Research was normal UX/cust research... interviews, polls, etc.

Customers were intelligent and motivated by a desire to do their own hedging rather than have an REP in the middle with an opaque profits. There’s a lot of profit in there and customers wanted to keep it. Customer ultimately knows his own demand and tolerances better than any REP. When I say “he” I mean men. Overwhelmingly male market. Lots of small business owners, day traders, cognizant their investment performance. This was very early. Few had even heard of Griddy at this point. I think it’s a fantastic addition to the market. What’s missing is the ability to hold futures. That would really level the playing field for sophisticated customers.

[rfdave]

Sounds like a fun filled hobby. How many people are interested in actually spending 30 to 40 hours spooling up to understand what they're getting, and 5 to 10 hours a month tracking it? I'm sure there's a population, but I'd rather spend another $20/month and do something fun with my time.

[bumby]

Thanks for responding. I’ll just say it’s important to distinguish between a desire to make a profit and the ability to accurately gauge risk. Behavioral economics has a lot to say about this

[bitcurious]

Given that neither the power companies nor the regulatory bodies correctly anticipated this risk I think it’s a huge stretch to say that consumers did.

[guyzero]

" a good thing somehow suddenly became "a scam"."

Does Griddy push real-time cost information to consumers to enable them to react to situations like this? "Scam" might be harsh, but their model clearly failed.

[baldeagle]

I'm not a customer - but I've seen screenshots of their app for doing just that, along with alerting.

[greedo]

Nice victim blaming.

[emteycz]

Stop using this term for people who were not victims of anyone other than themselves, it hurts actual victims.

[talentedcoin]

The reason why we have things like regulations and consumer protection laws is exactly to prevent people from, as you put it, becoming victims of themselves.

If everyone had this kind of attitude, we'd still be driving cars with no seatbelts.

[emteycz]

Yeah, except that car manufacturers started to put seatbelts into cars before regulation. Similarly with all other protection systems. Regulation made it ubiquitous and that's great, but don't mislead like this.

It's very easy to become a "victim" of yourself even in a regulated world and I assure you the number of people who do will not go down, only the means of doing so will change. Perhaps we should focus on education instead of regulation.

[greedo]

There's a reason that we term things like power and water "public" utilities, and that decent, well run governments regulate them. One, it's to ensure safe, reliable supplies. And two, to make sure that they're fairly priced. What happened in Texas shows the complete and utter failure in this regard. Sure the citizens of Texas voted for this complete clusterfsck, but not everyone, and those who end up with the short end of the stick shouldn't be blamed because the majority were a bunch of idiots fed lies for decades.

[renewiltord]

> Unfortunately, as with anything like this, the followers and fools soon showed up (reminiscent of $GME) and a good thing somehow suddenly became "a scam".

Haha, isn't this just the thing? It's the same thing as with Kickstarter, Bountysource, numerous Google betas, etc. The risks are just sitting there visible as all heck, and fools will jump in blind and then scream when the scary event happens.

It has been the best argument for paternalism I've ever seen: not to keep people safe from themselves, but to keep fools away from the rest of us so that we can make intelligent risky decisions.

In fact, I've shifted my view of the accredited investor thing. I am so glad a bunch of blind followers can't just do something dumb and then ruin everything for the rest of us.