Prices are crucial: every price represents a momentary social consensus about a good’s best use. The consensus is momentary because people act on a steady stream of new ideas about how to use what. A quick glance at Amazon suggests I could get organic whole-wheat flour for fourteen cents a pound. Right now, someone, somewhere might be ordering organic whole-wheat flour for fourteen cents a pound because she thinks she can use a bunch of other assets to turn each fourteen-cent pound of flour into twenty cents worth of baked bread. I, on the other hand, am abstaining from buying the flour because at this very moment I think the best use of my time and money is “saving in anticipation of retirement or emergency” rather than baking bread. The price of fourteen cents a pound transmits crucial information, and both the aspiring baker and the economist act on that information with reference to the rest of their knowledge about “the particular circumstances of time and place.”
Three things are weakening the grid. One is the rush to add renewable energy sources such as wind and solar, which depend on amenable weather to function. Second, over the past few years, numerous coal and nuclear plants that provide baseload power and help keep the grid stable have closed. Third, regional transmission organizations such as Ercot in Texas and Caiso in California are mismanaging the system. They are not providing enough incentives to ensure reliability such as providing payments to generators that have on-site fuel storage.
Renewable energy promoters don’t want to admit that wind and solar are undermining the grid. But the North American Electric Reliability Corporation, a nonprofit trade group, said in a report last month that “changing resource mix” is the most urgent challenge for reliability. The group says America’s electric generation capacity “is increasingly characterized as one that is sensitive to extreme, widespread, and long duration temperatures as well as wind and solar droughts.”