Texas power crisis revealed flaw in market’s design
This is classic “efficiency” vs “antifragility.” There are some things that are okay to ocassionally fail, and for those it’s often good to pursue efficiency. But for something critical like electricity, the market all decided - with good financial justification - that it would be more profitable to just let the system fail occasionally than to be hardened against long-tail events.In systems engineering if we want this to not happen we usually intentionally add volatility, things like putting chaos monkey into your infra so that long-tail failures become common and thus the necessary hardening can’t be missed.I’m not quite sure what this would look like for an electricity market. Maybe something like huge fines for having your capacity go off-line, which require insurance, and the insurers thus require winterization or they charge way higher rates which make your plant uneconomical. Or a regulation that says all plants must be winterized to a certain degree thus the cost of electricity will just be higher for everyone to pay for mitigation of long tail risk. The fines approach is more indirect but - assuming it works - it leaves room for edge cases and innovation that the “orderly but dumb” regulation does not.