“So will Michael Giberson and Lynne Kiesling ever consider the opportunity cost of their politicized electricity ‘market’? Will they consider a real free market that was at the center of the classical liberal debate before mandatory open access (etc.) came along? How much failure–and how far on the ‘road to serfdom’ does U.S. energy policy have to go before mid-course corrections?”
Lynne Kiesling and her close associate Michael Giberson have done great damage to the simple conception of a free-market electricity market and related public policy. By the use of hidden assumptions, cloudy definitions, and disengagement (all to “raise rival’s cost”), they have misled many free-market scholars in regard to a fundamental industry.
I am documenting this as much as I can for the historical record. Kiesling counters that I am ignorant of the technical subject matter and exhibit “aggressiveness” in my quest for clarification and openness. As it is, my basic questions get answered only in bits and pieces and only after, yes, direct confrontation.
From this, Lynne has admitted to her “synthetic theory of regulation and technological change” where “the grid is a common pool resource in which it is literally—literally—impossible to define and enforce property rights.” This is statism on stilts–with no midcourse correction amid the Biden Administration’s step-by-step takeover of power grid (and energy markets in general). Free-market advocates beware….
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Michael Giberson is less evasive and arrogant, but he is beholden to Lynne and has chosen the statist route with R Street. My exchange below began when he reposted a piece by Pat Wood III with the comment:
Pat Wood: “Outsiders are surprised when I assert that Texas is setting the global path for the clean energy transition. That shift is happening here faster than anywhere else. And it’s being driven by markets and innovators, not by monopolies and governments.”
Bradley: Mike: no critical comment here? ‘All of the above’ with wind and solar and batteries okay with you?
Giberson: Yes, I believe markets will continue to work, even with wind and solar and batteries. Obviously grid operation rules are, like for instance the rules of the road affecting pizza delivery, not market outcomes but rather part of the group-determined rules needed for multiple companies to jointly share the grid.
As problems emerge participants will need to continue to work on the grid rules to discourage too much free riding on the reliability efforts of others. Some rules may be targeted to problems associated with particular technology (ie resources interconnecting via grid-following inverters may reasonably be treated differently than other resources). Other than that sort of limitation the market rules should aspire to tech neutrality and “all of the above” is great (or rather, “whatever consumers want to pay for” is great).
Bradley: If you think a governmental market of central wholesale planning (ISOs/RTOs) is a market, and a worst-energies-first is a market, then the concept of a free market has no meaning.
Under price controls, there is still a market. A legal market, a black market, etc. But it is the very opposite of what a free market, classical liberal considers a market.
Your analogy of delivery on a government road is not very persuasive in the case of electricity. Any other analogies?
The “virtual power plant’ is about as Statist as I can think of, short of a nationalized grid. ‘Real time pricing’ in the framework is government rationing once removed.
Giberson: Re: “The ‘virtual power plant’ is about as Statist as I can think of, short of a nationalized grid. ‘Real time pricing’ in the framework is government rationing once removed.”
Rob, your objections need substance. What is “statist” about so-called virtual power plants? In ERCOT a VPP is simply a retailer coordinating demand-side resources to reduce consumer costs and help stabilize the market. It’s a tiny effort, all things considered, but it is one tiny way some consumers can better manage their energy use. What on earth is your objection?
“Real-time pricing … is government rationing once removed”? I assumed you understood the role of energy imbalance markets in electric markets, but now I’m not so sure. Most power that flows through ERCOT is bought/sold through long-term or short-term contracts negotiated bilaterally between generators and retailers. Because of natural variability between planned consumption and actual consumption on the demand side, and similarly on the supply side, physical production and consumption will not precisely match contracted volumes. In ERCOT the imbalances are settled at market prices based on voluntary bids and offers made available to the market. This is the real time price.
Gov rationing? No.
I responded:
The Virtual Power Plant is an energy-environmental term for a continuation of the present to where (open-ended, highly subsidized) wind and solar penetration is joined by batteries to have a transformed grid. That is Statism-on-stilts on the supply side. “Tiny” efforts toward this goal might be a ‘tiny’ definition of VPPs.
A centrally planned wholesale market (PUCT/ERCOT) here in Texas, with wind, solar, battery takeover, does not generate prices that a free market does. It is political pricing inherited downstream. (Any direct CO2 pricing adds to this.)
Political pricing from government-induced supply distortions/shortages is “government once removed.” It is more government intervention to rescue prior. And with smart meters, instruction to thermostats to be lower in winter and higher in summer (etc.) is government in the home and business. It is a ‘road to serfdom” by decree and degree.
Opportunity cost in political economy terms is the free market vs. Statism. The free market stands as the alternative to dealing with the problems of intervention at each piecemeal junction.
That fact that you (and Lynne “I will not dance to your tune” Kiesling) refuse to even present/consider the true free market alternative (traditionally defined)–and are exclusively wed to a ‘make-statism-work-better’ paradigm–is what is very peculiar and disingenuous.
Disengagement, as in: Gone. Silence. No reply. The same story (chronically) with Kiesling here, here, here, and here.
So will Michael Giberson and Lynn Kiesling ever consider the opportunity cost of their politicized electricity “market”? Will they consider a real free market that was at the center of the classical liberal debate before mandatory open access (et al.) came along? How much failure–and how far on the ‘road to serfdom’ does U.S. energy policy have to go before mid-course corrections?
Rob, you have one idea about what classical liberalism demands for U.S. electric power. Other folks have alternative views of what classical liberal commitments demand.
You want to overthrow rather that work within the system for improvements. I’m happy to see your contribution. Develop your case for free market electricity and get about the difficult business of persuading people you have the best idea.
I am also happy to be working to expand markets and promote customer empowerment in the US electric power industry. In my view, promoting markets and entrepreneurial opportunity in an industry dominated by government grants of privilege clearly falls within the range of respectable behavior for a classical liberal.
For this reason I strongly object to your “statist” characterization of my position.
Maybe your outsider-revolutionary approach will get more freedom for more people sooner than my engagement-evolutionary approach. The future is uncertain and it is possible for reasonable people to disagree on strategy.
A disagreement on strategy hardly seems sufficient to warrant your frequent disparagement.
We can cite Mises and Hayek and Adam Smith and whatever authorities you like on classical liberalism. I believe we share respect for these figures, and indeed on many fundamental principles that constitute the classical liberal view. But, oddly, my classical liberalism appears to have room for your differing views, but your classical liberalism is intolerant of alternatives.
I’d encourage you to cut the name-calling and get back to the difficult business of advancing liberty.
Thanks for responding….
First, can you state what “alternative views of what classical liberal commitments demand”? What is 1) a free market in electricity and 2) private property rights relating to electricity? And 3) what is your end state?
You are trying to color me as some sort of a radical trying to overthrow the system. The classical liberal tradition (and you know this as well as anyone) has always been to de-franchise the utilities and remove other public utility regulation to allow a market discovery process. The problem with you (and Lynne) is the intellectual blackout to even consider an alternative to what today is the opposite of a free market in electricity. Ideas have consequences, and the fact that you will not allow a place at the table for a real private property, free market alternative (which worked well in practice) is more than peculiar.
Central planning of the wholesale market in ISOs/RTOs has predictably run into the economic calculation problem. Grids are wounded and politicized. Did you ever predict this? Do you find yourself with a ‘tiger by the tail’? At what point do you say, “okay, let’s describe a real free market in electricity as a first step toward getting there.” Ideas have consequences, right?
My efforts are not really name calling. They are whistle blowing after many years (decades really) of watching a bad movie unfold. If you really are what you say you are, define your terms in electricity so we can advance the real debate between government and markets. Tell us, intellectually, why we cannot or should not have a real free market in electricity.