Media Blog

You Could Build a Giant Toaster in West Texas …

… and get paid to operate it.

The most interesting environmental story of the day is here, not in the mainstream media. On the perverse incentives created by wind-farm subsidies — a program sure to get bigger and more ridiculous under the Obama administration:

In the first half of 2008, prices were below zero nearly 20 percent of the time. During March, when negative prices were most frequent, prices were below zero about 33 percent of the time. After mostly taking the summer off, negative power prices were back to near 10 percent in October.

… This seems a little crazy. During these negative price periods, suppliers are paying ERCOT to take their power. Consumers (at least at the wholesale level) are getting paid for using power, and the more power consumers use the more they get paid. These prices are a big anti-conservation incentive. You could, as a correspondent put it to me, build a giant toaster in West Texas and be paid by generators to operate it.

The problem, it seems, is that wind-farmers get paid for output with no regard for whether the power happens to be needed when it is generated.

Alex Tabarrok has thoughts here.

Planet Gore is, naturally, on the case. 

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