Suppose there is apparent demand for 100GW of power. Due to faults your region's generators are only able to supply 75GW of power maximum no matter what price you offer. So you deliberately drop some groups of customers (rolling blackouts to residential areas). Now your residual demand (ignoring those customers freezing in the dark) sum to only 65GW†, you can supply them all. Great!
If your system automatically adjusts price to hit demand it will begin reducing the price, after all demand is lower than supply, how about $6000? $3000? $1200? Ah, that seems to be the magic number. At $1200 we can get 65GW of power.
But wait, we don't want 65GW of power. We want 100GW of power, the fact we can't have that means rolling blackouts. It makes no sense to cause rolling blackouts and reduce prices, the prices need to stay high until we can actually supply everybody.
In a more sensibly architected system, low priority industrial users are blacked out first, and if you must have rolling blackouts for residential customers you pin prices at maximum until you don't need blackouts due to recovering supply (or you use some emergency legal authority to compel generation at some agreed price).
But that's not Texas.
†For a variety of reasons you won't be able to cleanly shed arbitrary amounts of demand, just slice off big chunks and hope, in the process you're probably going to kill people.
The basis of this argument is that there were generators who were waiting for prices to go higher before going online. I don’t believe that was the case here. Plants weren’t able to come online because natural gas lines, piles of coal, wind turbines, nuclear coolant water were freezing over and could not be used.
I don’t know the right answer but forcing electricity rates to the highest allowed limit for a week allowed these generators to make insane amount of money and i’m convinced it improved the outcome of this whole disaster.
As I understand it, Texas hopes to stimulate supply by offering higher prices. Does that work? Well, it clearly works to some extent normally.
If your legislature (not to mention local culture) has insisted you must only use a hammer, those screws are getting hammered in, too bad.
If you have greater import/export capacity the higher prices ensure you're importing. In this particular case that would likely have made no difference, it's not as though the storm was just affecting Texas, but in other cases or with a smaller deficit that might save your backside.
Also as I understand it, some places pay generators for their capacity to deliver power if it were needed, even if in fact they're never needed. So that can be a better plan because it makes the incentive not to fail clearer.
I've actually been at a power plant where one block has never been switched on (except for maintenance). The block is there because it can be switched on, if necessary.
The texans wanted low prices and structured their pricing 100% for that: Power generators are paid 100% for being cheapest. Most other places use a combination of low pricing and availability, and the regulator will award contracts for availability to various generators that have different failure modes.
If your system automatically adjusts price to hit demand it will begin reducing the price, after all demand is lower than supply, how about $6000? $3000? $1200? Ah, that seems to be the magic number. At $1200 we can get 65GW of power.
But wait, we don't want 65GW of power. We want 100GW of power, the fact we can't have that means rolling blackouts. It makes no sense to cause rolling blackouts and reduce prices, the prices need to stay high until we can actually supply everybody.
In a more sensibly architected system, low priority industrial users are blacked out first, and if you must have rolling blackouts for residential customers you pin prices at maximum until you don't need blackouts due to recovering supply (or you use some emergency legal authority to compel generation at some agreed price).
But that's not Texas.
†For a variety of reasons you won't be able to cleanly shed arbitrary amounts of demand, just slice off big chunks and hope, in the process you're probably going to kill people.