I've read this a couple times and trying to understand it. Economics usually takes some mental digestion for me.
In market/product isolation? If it's a mixed market, then much of that private good will be met by the private providers. So Reliability will be provided by generators and increasingly battery storage. The high reliability segments exit the mixed market and it moves toward a public good thereby decreasing Scale. So equilibrium is a less efficient Public segment.
There haven't been great substitutes, but now PV/battery are reaching cost parity, we start risking a downward spiral that damages the electricity industry. Forward looking utilities are concerned and should be.
Understanding Externalities and lowering Transaction cost make sense. But many of those externalities impact Productivity or public safety which isn't rationalized well. And many utilities aren't behaving rationally, or for personal short-term benefit. It's mind blowing a certain utility has somehow had 2 of America's top 10 bankruptcies.
I must be missing and mangling the argument. But Classic Economics makes a re-occurring error by evaluating complex, social systems in isolation/idealism.
Reliability is most efficiently delivered as a public good, with some exceptions like data centers and hospitals, etc. Agents often don't choose to "self-internalize the relevant, inevitable, value effects of their interdependence." Even when rationally they should. Human nature.
Thanks for the thoughtful piece Lynne. I'm very much enjoying your writing and pay better attention to these areas.
I've read this a couple times and trying to understand it. Economics usually takes some mental digestion for me.
In market/product isolation? If it's a mixed market, then much of that private good will be met by the private providers. So Reliability will be provided by generators and increasingly battery storage. The high reliability segments exit the mixed market and it moves toward a public good thereby decreasing Scale. So equilibrium is a less efficient Public segment.
There haven't been great substitutes, but now PV/battery are reaching cost parity, we start risking a downward spiral that damages the electricity industry. Forward looking utilities are concerned and should be.
Understanding Externalities and lowering Transaction cost make sense. But many of those externalities impact Productivity or public safety which isn't rationalized well. And many utilities aren't behaving rationally, or for personal short-term benefit. It's mind blowing a certain utility has somehow had 2 of America's top 10 bankruptcies.
I must be missing and mangling the argument. But Classic Economics makes a re-occurring error by evaluating complex, social systems in isolation/idealism.
Reliability is most efficiently delivered as a public good, with some exceptions like data centers and hospitals, etc. Agents often don't choose to "self-internalize the relevant, inevitable, value effects of their interdependence." Even when rationally they should. Human nature.
Thanks for the thoughtful piece Lynne. I'm very much enjoying your writing and pay better attention to these areas.