I'm a little puzzled by the claims that market design was not an issue in ERCOT. I agree that a capacity market would not have performed better necessarily -- it was an issue of systemic preparedness -- but how the system was built/prepared is a product of market design!
ERCOT was designed with the expectation that scarcity pricing profits would incentivize private actors (generators) to internalize risks and provide reliable capacity. Self-evidently, that incentive alone was not sufficient.
The profit motive was ample though. There were years worth of revenues to be made last week in the ERCOT market -- $11B on Thursday alone!

To paraphrase Walter Sobchak, "The price cap is not the issue here, Dude."
Rather, the profit-maximizing expectations of individual actors is a poor way to manage systemic risks for essential services. ERCOT's design relies on generators to consider these low-frequency, high-consequence events in their capex planning (bc $ to be made!). That's flawed.
Sure you might get some folks to prepare for this possibility, but will you get enough? Another 10-20GW worth? And that's before we even get into the nexus with other complex systems, like the gas pipeline network.
Furthermore, the risk is asymmetric. For a offline NG plant, the lost revenue last week is a bummer, but they have 313 days left to make an annual profit. Where's their cost?

Humans are loss-averse. Unrealized potential revenue is not the same motivation as a penalty.
For everyone else, the unsafe water, burst pipes, and *deaths* -- that's the externalized risk, and it's all penalty. Texans don't have 313 days left to profit. So no, the lost potential revenue is not the same.
How risk is allocated in a market is a matter of design. The ERCOT market was designed for these risks to be internalized by market participants, and when they were not, the public paid a massive cost.

Maybe the market did work as designed. In that case the design is flawed.

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More from @benserrurier

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