This was done in Texas. You could get power at pass thru rate. The freeze came and griddy, a pass thru supplier begged everyone to switch because the rates would explode due to market demand pricing. Those who didnt switch got charged thousands because it's straight pass thru pricing.
Some who knew how this worked just turned off their breakers or switched to generators. Those who refused complained to the state, and then of course the rest is history.
This is an issue where there just weren't sane defaults.
Some people will want power to be turned off at the slightest increase in price.
Most people will tolerate a small increase in spot pricing over the normal state of affairs, but would like to be disconnected if, say, electricity more than doubles over what would be normal for that time of day.
Other people will tolerate huge increases in price-- and should be able to opt into this behavior after careful acceptance of disclosures.
Indeed, having different thresholds where demand goes away is essential for spot markets to work. Otherwise, the only change in demand is from those actively watching the spot rates (either through automation or manually). It makes sense to provide a minimal level of that automation "built into" the product.
A house will not cool down immediately. It will cool down rather slowly in most cases (or at least if it's well built). There are also various ways to store thermal energy or use alternative, non-electric heat sources.
If the price goes up 10000x there will be blackouts in any case regardless if spot pricing is used or not. Spot pricing will _reduce_ blackouts.
I'll ride out a house that's 55F for a few hours to avoid paying 100x rate for electricity.
Having the choice is better: you can have everyone decide based on their situation what reflects what they want. Otherwise, demand doesn't go away and the choice between who uses 100% of the power they want to use and who uses 0% is left to arbitrary choice.
That's so ridiculously American but fortunately 55 °F/13 °C isn't life threateningly cold. Winter Storm Uri was though. Being uncomfortable for a few hours for a couple thousand dollars, sure, make your choice. Being forced to choose to be in debt for the rest of your life, vs dying from cold exposure though? Just seems cruel to poor people. Which I guess is what passes for amusement for the rich.
If there's insufficient power after a disaster for all homes to be heated, you have to make a decision about where the power goes somehow. If you just let everyone demand all the normal amount of power, you're going to have to completely turn off a bunch of customers and the decision is going to be pretty arbitrary.
Obviously regulators should make sure these are very, very rare events (by requiring sufficient overprovisioning and redundancy vs. failure scenarios).
There are all kinds of market outcomes in a situation like this that we might not like (and might take actions to fix to some extent). But without a market and price mechanisms involved in allocating the scarce resource, you're going to get worse outcomes.
It's not just possible, it's actually done in practice.
You pay a lower rate and allow the utilities to shut off your power during peak demand. Usually people will have two meters - a regular one at full price, and a lower priced one that's connected only to heat pumps.
It's marketed as "let us control your thermostat for lower electric rates".
Yeah this would be the way to go. Intelligent, automatic, prioritized, voluntary, per-household (or even per-device) load shedding with no central planning required.
Some who knew how this worked just turned off their breakers or switched to generators. Those who refused complained to the state, and then of course the rest is history.
https://en.wikipedia.org/wiki/Griddy