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0 points__MatrixMan__3y ago0 comments

I do like the dynamic pricing idea. If you're not well situated for panels you can invest in batteries and sell at night what you bought during the day.

I don't have your faith in markets though. The invisible hand is a potent force indeed, but it's just as likely to flip you the bird as it is to solve a problem that you have. There's nothing about a market, for instance, that knows to keep prices high enough to prevent the wintertime aluminum smelters from burning all the stored energy and causing a humanitarian crisis a month later when there's not enough to weather a blizzard.

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londons_explore3y ago

Oh there is...

Imagine you see all the power being used up ahead of winter, and you predict this problem... Yet it seems like nobody else has noticed...

So you swoop in and, with profits in mind, you buy up some electricity futures contracts for December. They're quite cheap right now, and you suspect that when the blizzard hits they'll be really valuable. By doing so, you push the price of them up a bit.

Meanwhile, Fred over at the hydro plant sees that futures contracts for electricity are higher in December than now, so he'll make more money by switching off the generators now and using that water later in December when he'll get paid more for it.

Bob at the aluminium smelter sees that spot prices for power now are higher (because the hydro shut off), and futures prices suggest they'll be even higher in December too. So it's probably more profitable to shutdown the plant for repairs now, and restart production next year.

See how you noticing this problem started a chain of events that solved the problem? That's the power of markets - they can use the collective knowledge and intelligence of all the participants to solve a problem.

__MatrixMan__OP3y ago

If everyone has perfect information and my speculative advantage has only to do with some insight that I had, then yeah it all works out.

But once I've bought those futures, I have an incentive to spread misinformation about just how bad the shortage is going to be, and to make it difficult for others to have the same kind of insight in the future so that I can have the same advantage next year.

If I'm successful, I'll have created a situation where actors that can store energy hoard it, only parting with it at prices that leave people struggling to survive the winter. We end up losing that energy to inefficiencies in the storage media, and we end up losing people to warmer climes--people who would have otherwise contributed to energy projects that increase supply.

Markets work out in the abstract, but unless they're watched closely they sabotage the conditions that made them initially useful.

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