A great disturbance in the Force
by Tom Sullivan
The glorious and all-powerful, self-correcting MARKET (its Name be praised; genuflect if the Spirit moves) found itself disturbed earlier this week when something that wasn’t supposed to be possible happened. Very early on Sunday morning, the price of electricity went wonky in Texas (where else?). As Daniel Gross tells it:
And then a very strange thing happened: The so-called spot price of electricity in Texas fell toward zero, hit zero, and then went negative for several hours. As the Lone Star State slumbered, power producers were paying the state’s electricity system to take electricity off their hands. At one point, the negative price was $8.52 per megawatt hour.
Impossible, most economists would say. In any market—and especially in a state devoted to the free market, like Texas—makers won’t provide a product or service at a negative cost. Yet this could only have happened in Texas, which (not surprisingly) has carved out its own unique approach to electricity.
Texas being the sovereign republic of legend, the state has organized electricity production to make the state “an electricity island.” Texas may allow oil and gas pipelines to cross its borders, but not power lines. Its power grid does not connect with other states. This makes the Texas market for electricity self-contained as well, and if there is surplus production the Electric Reliability Council of Texas (ERCOT) cannot sell it to the national grid. Plus, its unique market structure resets the price of power going into the grid through a bidding process every 15 minutes.
Here’s the kicker: Texas also has more wind generating capacity than any other state. And it was particularly breezy in Texas last Sunday morning. Wind-farm owners had an incentive to lower their prices. And wind producers, Gross writes, still get a federal tax credit equal to $23 per megawatt-hour. You can do the math.
The MARKET will be displeased. Very. A sacrifice will be required. Guess whose?
In other Force-disturbing news, Apple’s new iOS 9 operating system will allow ad-blocking. Within hours of the iOS 9 release, ad-blocking apps shot to the top of the list at Apple’s App Store:
It was inevitable that something like this would happen. After all, we’ve been here before. In their pleas to readers that ad-blocking is killing their business, media executives sound exactly like their counterparts in the music and film industries who have spent untold millions searching for a way to prevent digital piracy. Some of those strategies worked better than others, but piracy in some form or another is here to stay. There will always be someone providing a new workaround, and audiences are rarely convinced by appeals to the sanctity of the artist’s—or, in this case, the journalist’s—craft.
In the near future, it seems likely that an arms race will break out. The answer to ad blockers is to create ads that can’t be blocked. The answer to those ads is to make more sophisticated ad blockers, and so on and so on.
The MARKET giveth and the MARKET taketh away. Blessed be the name of the MARKET.
(Taking a mental health day from the clown show.)