California Power and Commodity Markets

Excess capacity occurs in many industries, such as power, electricity, water, oil, mainframe time, bandwidth, etc. When deregulation came to the California energy market we saw an interesting thing occur. People would buy blocks of kilowatt-hours from the existing energy companies who made electricity. They had to make this available to anyone. So entrepreneurs Bought lots of it and then they sold it to others wishing to buy it. Commodity theory is fun to study, because it is everywhere in our civilization.

California energy companies sold the excess capacity at a bulk rate. They had to fulfill their contracts, even if they did not to have the energy. In the case of them not having the energy, they would have to go into the open market to other energy companies in other states within the grid and buy it for the prevailing price. Of course the price they would then the buying them for would be more due to the supply and demand of those other energy companies, also the problems in peaks and energy spikes. To make things even worse the energy bought needed to be transported, but it could not all fit thru the existing power lines, whoops? Rolling blackout, not so good.

The problem here is that you have a finite number of customers needing a fluctuating amount of energy, but when that energy need goes up as in summer and at the time of the blackouts in California it was a solar maximum, the 22 year cycle which brings hotter ambience earth surface temperatures caused people in California to require more energy for things like swimming pools motors, refrigerators, air conditioners and etc.

The problem still is not solved, we need more power plants in that region. Some clean coal burning plants and a few more nuclear power plants would sure help. Think about it, think about the energy our civilization needs.

“Lance Winslow” – If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs

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