Electricity Policy: An Exchange with Lynne Kiesling (more statism from a ‘classical liberal’)

“… the economist is looking for the why-behind-the-why. And that is where negative pricing for wind and low margins in general from the regulatory setup ruined the economics of the [natural gas] industry, resulting in premature retirements, a lack of new capacity, and cost avoidance. Are you saying that there was a ‘market failure’ with natural gas in [the Texas blackout of February 2021]?” (Bradley to Kiesling, below)

She engages and then disappears. She is the “classical liberal” who refuses to question the climate alarm and favors the government-forced energy transformation to wind, solar, and batteries–and demand-side rationing from the political center. And she is all-in with the centrally planned wholesale power markets, better known as Independent System Operators and Regional Transmission Organizations (ISOs and RTOs).

She trumpeted the Texas ISO as the national model until it imploded in February 2021–and now blames natural gas, not wind and solar or central government planning. With the wounded Texas grid, she is gung-ho about devising demand-side rationing models that will use smart meters to control your usage from a government planning entity. (It will start voluntarily, of course.)

She claims familiarity with Austrian School (market process) economics but does not present their views in her primer articles, much less consider viewpoints against “natural monopoly” and “market failure.” (They conflict with her opening assumptions to get her on the regulatory track.) She has bastardized the worldview of F. A. Hayek by claiming he would have supported mandatory open access (a basic violation of private property rights) and endorsed a centrally planned wholesale electricity market in order to have a ‘competitive’ retail market.

She does not recognize the process of regulation where one intervention leads to another and yet another–and her role in tip-toing down this road to serfdom (and trying to bring classical liberals with her). She seems to be more of a planning technocrat (specialty: ‘smart grid architecture’) than a political economist in the real world.

Here is my latest exchange with Lynne Kiesling where she ducks low when the questions get uncomfortably toward the bottom lines of her thinking.

——————-

Kiesling: The Texas Senate is politicizing their electricity markets, which will only harm Texas electricity customers through higher costs and distorted investments. https://knowledgeproblem.substack.com/p/the-state-senate-is-messing-with

Bradley: Texas’s grid is already politicized, right? The Federal Power Act of 1935, Public Utility Holding Company Act of 1935, Public Utility Regulatory Policies Act of 1978, Energy Policy Act of 1992, Texas Public Utility Regulatory Act of 1975, Texas Public Utility Regulatory Act of 1995, Texas Electric Restructuring Act of 1999…. The Federal Energy Regulatory Commission, Public Utility Commission of Texas, Electric Reliability Council of Texas, North American Electric Reliability Corporation, National Association of Regulatory Utility Commissioners….

Bradley: On your analysis of the ‘why’ of the Texas debacle [her linked paper], blaming natural gas and excusing wind and solar is disingenuous to me. Yes, the why of the event certainly involved the failure of thermal generation. But the ‘why behind the why’–the business and economic reasons–was a decade of wind and solar forced on the grid by government incentives that ruined the margins, the economics, of the reliables.

Incentives matter, and Atlas Shrugged. Never happened before in a century-plus of electricity ….

Kiesling: Did you read the data analyses, the academic papers, the FERC-NERC investigation report? If you read all of the analyses and you still don’t conclude that natural gas production and processing problems were the main cause, you are engaging in highly motivated reasoning.

Bradley: I have read a lot of them. Their conclusion is that yes, natural gas failed. That is the ‘why’–the physical why. But the economist is looking for the why-behind-the-why. And that is where negative pricing for wind and low margins in general from the regulatory setup ruined the economics of the industry, resulting in premature retirements, a lack of new capacity, and cost avoidance. [1]

Are you saying that there was a “market failure” with natural gas in this episode?

Bradley (to Tom Stacy): I do not see ‘market failure’ in electricity markets like Lynne does. Neither do I see natural gas as a “market failure” in the Texas debacle because … there was no free market.

Kiesling: Don’t put words in my mouth, Rob, particularly econ jargon words.

Bradley: Lynne: Let me ask you again. Why did natural gas fail in Texas in February 2021? Is it a ‘market failure’?

Kiesling:No

Bradley: Then why did natural gas fail? Anything to do with renewables?

Kiesling:No

Kiesling: I’m traveling for work today and through the week, so not very available to chat.

Bradley: Renewables had nothing to do with the failure of natural gas??

CRICKETS; This is a conversation that she is not comfortable having, and thus the vague answers and excuse to disengage.

[1] [Note: She revised her linked post to mention negative pricing after my comment.]

Appendix

Here are my posts on why wind and solar ‘failed’ natural gas (and coal) to create the crisis (in conjunction with central planner ERCOT):

Wind, Solar, and the Great Texas Blackout: Guilty as Charged (February 15, 2022)

Renewables “Market-Failed” Natural Gas in Texas (March 26, 2021)

And on the question of Lynne Kiesling as a free-market pretender:

Classical Liberalism and Electricity: Ten Questions for Lynne Kiesling (August 17, 2022)

Classical Liberalism and Electricity: An (Unfinished) Exchange with Lynne Kiesling (August 16, 2022)

Kiesling seems to have backtracked from her earlier ‘confession’ about wind/solar mispricing and grid instability from the intermittents:

Pokalsky, Borlick, Kiesling: Capacity Markets Now Essential in Texas (central planning rethink) August 5, 2021. Robert Borlick of her camp stated, quite bluntly:

I have stated earlier that the ERCOT market’s reliance on scarcity pricing did not foresee an environment with high penetration of zero-marginal cost resources. Back in 2005 I generically simulated an energy-only market to demonstrate how scarcity pricing would work. I never anticipated the mass introduction of renewables at that time.

And two posts on classical liberal electricity policy to differentiate from the government central planning endorsed by Kiesling (and Michael Giberson, Josiah Neeley, et al. at R-Street):

The Great Texas Blackout of 2021: Classical Liberalism and Electricity (May 3, 2021)

The Great Texas Blackout of 2021: Is Planning Necessary? (May 6, 2021)

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