Tim Worstall in The Register

Lynne Kiesling

The KP Spouse has introduced me to The Register, kind of a British Slashdot news website for computer folks. It’s very useful for keeping abreast of technical news, without some of the inane comment threads that can ensue on Slashdot (although I still love Slashdot, just not the comments on the posts).

I was happy to find this Tim Worstall article last week on the New Economics Foundation’s “Green New Deal” report. Tim, being Tim, pulls no punches:

The group, which describes itself as a collection of “experts in finance, energy and the environment” consists of various greens and lefties, Friends of the Earth, Green Party, Guardian journos and the like. And it arguably falls at the first hurdle by taking as fact three highly debatable points: that we face a financial crunch, a climate change one and an energy crunch. For a cloud of doubt hangs over the crunchiness of all three.

He then takes each of those three points in turn. For example, with respect to climate:

Similarly, we don’t face a climate change crunch: we have a chronic problem, not one that is either immediate or catastrophic. It’s extremely difficult to claim that Greenland melting in 2,500 AD is an immediate problem. As to the energy crunch and Peak Oil, well, markets themselves seem to be dealing with that rather well: oil at $130 a barrel will certainly reduce appetites for it, and if it becomes in yet shorter supply then prices will rise again and appetites will be further curbed. So too will other forms of energy generation flourish in the space now vacated.

But that is all being reasonable and rational – which really isn’t what this report is about. What it is about is their desire to impose their version of how you should live upon you, regardless of your own wishes. Cheeringly though the report is based on such a concatenation of false arguments and at times willful stupidity that there’s (well, at least I hope so) no chance of anyone taking it with the slightest bit of seriousness.

I hope Tim’s a regular at The Register; that would keep me reading regularly!

Massive thunderstorms!

Lynne Kiesling

Yowza … we had massive thunderstorms here last night, with the tornado sirens going for the first time I’ve ever heard them in Chicago. We actually grabbed the cat and the laptops and the firebox with the valuables and headed for the basement, where we poured pitchers of water and waited. Thankfully it all came to naught and was over quickly; within half an hour we were back upstairs watching the Weather Channel.

Lack of coordination between RTOs provides multi-million dollar gaming opportunity to some market participants – at the expense of others

Michael Giberson

On July 21, the New York Independent System Operator (NYISO) filed what was in effect an emergency rule change – proposed to go into effect the morning of the next day unless FERC stopped it (and FERC didn’t stop it) – in order to bring to a halt certain gaming activities pursued by some market participants.

In the filing, the NYISO described how a market participant could schedule power flows between New York and neighboring PJM in two ways – a direct path and an indirect path. The indirect path – using external transactions looping around Lake Erie (scheduling through Ontario and the Midwest ISO, and entering PJM from the west) – is essentially a false schedule. Power generally flows in the interconnected AC system over the path of least resistance, so transactions scheduled using the indirect “Lake Erie looping” path end up mostly flowing over the direct links between New York and PJM.

When the difference between the New York price received for power imported from PJM and the New York price charged for power exported to Ontario is greater than the cost of scheduling external transactions around the Lake Erie loop, a market participant can make money by scheduling the indirect path.

Because the actual flow will tend to be directly from western New York across the NYISO-managed transmission system to the PJM border, but isn’t scheduled on that path, the flows create west-to-east congestion costs that are paid by all transmission users (and not solely by the transmission users who caused the congestion). The market participant in effect uses the NYISO-managed grid without paying full price for it. In addition, the practice would tend to depress prices in western New York and increase prices in eastern New York and create ‘phantom congestion’ over the external paths around the Lake Erie loop. The result would be potentially significant economic losses in all affected regional power grids because of the inefficient use of the interconnections between regions and less efficient unit commitment and dispatch.

NYISO said that the scheduling practice seemed to emerge in early 2008 and tended to increase over time. The Public Utility Law Project blog (PULP Network) has noted estimates of the costs created by the Lake Erie looping strategy ranging as high as $290 million. (The PULP Network has also posted a more detailed description of the filing and a discussion of various comments filed in the proceeding by it and other stakeholders. See also this story by Platts.) The NYISO filing proposed to stop the practice going forward, but didn’t propose to penalize the market participants for using the indirect paths prior to the rule change. Many stakeholders urged the Commission to use its anti-energy market manipulation authority to penalize market participants who employed the inefficient-but-profitable Lake Erie looping strategy.

By the way, the emergency filing of rule changes appears to have had the desired effect. The NYISO reported to FERC on July 31 that in the seven days immediately after the filing power flows around Lake Erie returned to levels typical of 2007.

Ironically, one of the factors contributing to the economic viability of the Lake Erie looping strategy was the reduction or elimination of charges on transactions between PJM and MISO, a policy long advocated by transmission users and supported by FERC as a way of reducing “seams.” The lower the costs for external transactions between regions around Lake Erie, the more likely it would have been economical to engage in the Lake Erie looping schedule. However, the implication is not to re-raise the costs of external transactions but to more fully coordinate power scheduling in neighboring regions. Improving coordination between RTOs will improve system efficiency and on net lower prices to consumers.

FERC has long said elimination of seams between power markets is one of its priorities; it is past time to actually make it a priority.

(NOTE: While until recently I worked for the firm that provides market monitoring services to the NYISO, I did not work on the related analyses or participate in the development of related reports. My commentary here is based solely on the NYISO filing and other public documents linked to above. -MG)