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No more wholesale price caps?

Doug Houseman's picture
Visionary and innovator in the utility industry and grid modernization, Burns & McDonnell

I have a broad background in utilities and energy. I worked for Capgemini in the Energy Practice for more than 15 years. During that time I rose to the position of CTO of the 12,000 person...

  • Member since 2017
  • 255 items added with 91,474 views
  • Jun 16, 2022

Australia, California, Texas... have all set or raised price caps in their wholesale markets with horrible results.

In Texas pushing the cap to $9,000 created chaos and not much more power in Feb 2021, In Australia the current caps caused generators to decide not to bid in. In California it has lead to the demise of several peaker plants, and the rush to replace them.

Instead of a cap, markets should create a rule that investigates excessive bids, and bidders found gaming the market or grabbing windfall profits in a tight market should be fined the windfall profits.

The whole idea of a market clearing price might need to be examined and tossed too.
Both are worth investigating and debating. are fundamentals of current market designs, both may be obsolete?

As the resources in the market evolve, should not the fundamental concepts be re-examined too?

Mark Silverstone's picture
Mark Silverstone on Jun 21, 2022

Thanks Doug - Could you please explain a bit more about how wholesale price caps work, or not, as the case may be? What are they supposed to do and what causes the problems that you mention?

Doug Houseman's picture
Thank Doug for the Post!
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