What liberals get wrong: Deregulation is not the problem. Perverse incentives created by imperfect deregulation is. While wholesale prices in Texas climbed to $9,000/MWh and clobbered a small part of the consumer market, the vast majority of electricity customers in Texas continued to pay retail prices close to $120/MWh. They had no incentive to reduce their consumption, which would have freed supply to meet the needs of others. Texas’ independent regulatory authority (separating its market from the rest of the nation) was also not the problem. All the surrounding states (potential suppliers of energy) were just as hard hit by frigid temperatures as Texas was. What conservatives get wrong. Green New Deal thinking was not the problem. Low temperatures affected all sources of supply. Over one six-hour interval, wind generation fell 32%, coal fell 13%, and natural gas fell 25%. Solutions: We need variable pricing, with economic incentives for conservation by all electricity users. Buyers need to pay more when the cost of power is higher. But, just as almost all health insurance in this country has a catastrophic cap, that feature should also protect energy consumers in the same way. Markets are also capable of integrating the unique features of the different sources of supply and should be free to do so. Our friend and Nobel Prize winner Vernon Smith has a good analysis in the Dallas Morning News. See also, this commentary by Tyler Cowen.

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