Michael Giberson

From the PR desk:

HOUSTON, Sept. 4, 2012 /PRNewswire/ – Direct Energy has launched New Leaf Energy, a new Texas brand that offers 100 percent renewable, air-pollution-free energy, 100 percent from Texas wind turbines. New Leaf Energy brings expanded product choice in Texas’ green energy market and a variety of plan options that ease the way for residential customers in Greater Houston, Dallas-Fort Worth, Corpus Christi and beyond to help support long-term sustainability of the region and the planet.

“New Leaf Energy is committed to renewing the future, one household at a time,” said Rob Comstock, senior vice president at Direct Energy and general manager for the company’s Texas residential business. “It meets one of the industry’s highest standards by sourcing only 100 percent Green-e® Certified renewable wind energy, at rates designed to make renewable energy easily accessible for consumers. By choosing New Leaf Energy, they are making a statement to electricity producers that they support and prefer electricity provided by renewable sources. As more people sign up with New Leaf Energy, more renewable energy is produced.”

Consumers signing up for this product are promised their power is sourced only from “100 percent Green-e® Certified renewable wind energy,” and what’s more that power is “100 percent from Texas wind turbines.”

I don’t see any asterisks tagged on to these claims where they explain – hey, the wind doesn’t blow all of the time, the sun doesn’t shine all of the time, and there is hardly any hydropower in Texas even in years without a drought, so once in a while we will supplement your power supplies with a mix of coal, natural gas, and nuclear energy and then we will buy extra wind power sometime later. Nope, in the press release and on the company website the claims are “all renewable, all of the time.”

Therefore, officially, I am amazed. Since Direct Energy doesn’t plan to cut off its “100 percent Texas wind” consumers when Texas wind power production drops off, I can only conclude that the company has solved the complex technical issues surrounding energy storage.

SOMEWHAT RELATED: “Renewable Incentives Spark Debate at Texas Hearing” from the invaluable Texas Tribune.

ADDED: In case you’re wondering, there are not a lot of ski lifts in Texas either.

Michael Giberson

CenterPoint Energy, the Houston-area electric distribution company, has launched MyTrueCost.com to help area retail electric customers shop for electric power. Help may be needed: currently 43 companies offer a total of 239 different service options in the CenterPoint service territory according to data from Powertochoose.org, the Texas PUC’s retail power website.

The basic idea is pretty simple: customers sign up, TrueCost accesses their smart-meter based electric power consumption data and estimates bills, the customers provide some information on the kind of retailer and contract they want (low price, environmental characteristics, number of PUC complaints, years in service, etc.), and then the website identifies the contracts that appears most suited to the customer.

TrueCost doesn’t search through all possible contracts, however, just contracts from the several retailers that have agreed to participate. Currently 10 of the 43 companies in the area are participating. Customers should be aware that TrueCost gets paid a flat fee by the retailer for each customer that signs up through the service. (TrueCost noted in the Q&A that the flat fee means that the service doesn’t have an incentive to upsell customers to more costly contracts.)

Simple. Smart. Cool. (And speaking of cool, the young people of Houston would like you to know that a Forbes real estate blogger has named Houston the #1 on its list of America’s Coolest Cities to Live.)

By the way, TrueCost also charts average retail power prices offered in Texas’s competitive retail power markets and provides commentary in an accompanying blog.

One-year plans keep momentum from summer price spike (July 5, 2012)

INVITATION: If any of our Houston area readers have tried out MyTrueCost, send me an email and let me know what you think. My email address can be found here.

Michael Giberson

The Nest smart thermostat made a bit of a splash when it was released (and countersplash from other energy equipment makers who said they offered similar features, and counter-countersplash from folks who said “sure, but not that worked so well for consumers,” etc., etc. We talked about Nest here, here, here and here.). Then, like other geez-whiz gadgets, they mostly disappeared from the energy tech geek press.

But Nest hasn’t really disappeared, it is only that “gee whiz” only gets you so far. Just recently Nest and Texas power retailer Reliant joined together in Reliant’s Learn & Conserve energy contract. Customers signing up for the rate get a Nest learning thermostat and a 24-month fixed price contract. Cool! (See detail at Reliant’s website; see on Nest blog.)

Of course the energy econ geek in me says, “What?? A fixed price contract??? Couldn’t they do something more interesting than that?” But what the heck, it’s a marketplace and if Reliant isn’t more creative with their rate design that just means that there is opportunity for others to innovate. In the meantime the energy econ geek in me says, “Cool!”

Michael Giberson

Recently the Brattle Group submitted a study of resource adequacy issues within the ERCOT power system and the policy options available to ERCOT and the PUC of Texas, the regulatory authority overseeing the ERCOT system. As the Brattle report points out, ERCOT has so far stuck with a so-called “energy-only” market design while the other RTO markets have implemented some form of capacity markets to help assure the market will be adequately supplied with generating resources.

The Brattle report is available from the ERCOT website. The PUCT is taking comments on the report in Project No. 40480, “Commission Proceeding Regarding Policy Options on Resource Adequacy.” A workshop will be held to discuss the Brattle recommendations on July 27, 2012 at the PUCT offices in Austin.

BP Energy Company finds Hayek’s knowledge problem as a key issue in electric power market design. After quoting a segment from “The Use of Knowledge in Society,” BP Energy Company writes:

Hayek’s “Knowledge Problem” and its optimal solution – decentralized commercial markets – provide the best lens for regulators to see the fundamental issue in electricity market design in response to rapid technological change and increasingly diverse groups of willingly innovative buyers and sellers. As the procurement and use of electricity cross a complexity threshold, as a few customer classes are transformed into a multitude of individual market participants, electricity market design needs to move away from centralized planning to a decentralized procurement of resources, to be both sustainable and efficient in meeting the resource adequacy objectives for the bulk power system and society at large.

The unwieldy process of centralized procurement of resources in the organized markets within the Eastern Interconnection is not proving to be a healthy evolution for electricity markets; instead, these interventions have greatly interfered with the natural development of networks among market participants that can lead to a healthier market ecosystem. Utility economist Kenneth Rose, in a recent working paper that highlights the continuing problems of centralized procurement in the capacity mechanisms in the Eastern Interconnect, reprises the “Knowledge Problem” in the following analysis:

“…. They (RTOs and regulators) are attempting to create a final product market for something that is merely one input of many that are needed to generate electricity.

This may explain why the capacity construct that the RTOs are using has become so complex. Every aspect of the capacity market design has to be redesigned and readjusted to fit changing conditions, rather than allowing the market participants to adjust to market information over time, as happens generally in competitive markets…..

The complex mechanism of capacity markets is not self-sustaining since the RTOs and regulators will need to continuously update and fix the apparatus as conditions change…. A truly competitive market, in contrast, changes as circumstances change, without the stakeholders having to agree on changes and without the regulator having to insert its judgment by choosing and approving what it thinks will work. “

The result is that to date, regulators, not market participants, procure virtually all of new resources. Some of those resources, especially “demand resources,” are poorly designed and have questionable value. Incumbent technologies and business practices are favored over innovative ones, to the ultimate detriment of consumers and local businesses.

As might be obvious by the name of this blog, we at KP find Hayek’s identification of the knowledge problem a key discovery in the long history of the study of markets. It is no surprise that efforts to manage the growth of markets run up against knowledge problem issues, and regulators and other market designers would be wise to consider its significance.

NOTES: Hayek’s article, “The Use of Knowledge in Society,” was published in the American Economic Review (September 1945) (ungated here and here). Rose’s report is “An Examination of RTO Capacity Markets,” IPU Working Paper No. 2011-4, Michigan State University (September 2011). I mentioned the Brattle report on ERCOT resource adequacy issues in this earlier post, see also this earlier post on capacity market issues.