Load shedding is implemented at the distribution substation level, not individual customers (unless they are very large customers connected directly to the high-voltage network like a manufacturing plant).

Furthermore, the retail energy providers offering these wholesale pricing schemes are just over-the-top resellers of energy, they don't own or operate any part of the electricity network. They can't instantaneously turn off anything.

>Load shedding is implemented at the distribution substation level, not individual customers

Not really, what I'm talking about are devices that turn off high load devices when system load is too high, so the load can be reduced[1]. While it might be true that these devices aren't activated on a per-residence level, the general effect of raising prices, and people's electricity getting cut off in response is the same. The only difference is that you're shutting off power to people who are willing to pay for it the least, rather than the whole neighborhood.

[1] https://en.wikipedia.org/wiki/Demand_response

I have both a technical and a practical answer for you.

The technical answer is that demand response resources are considered dispatchable or interruptible load. Load shedding is the dropping of "firm" or non-dispatchable load. Typically, load shedding due to energy inadequacy only occurs after all demand response resources have already been called in. It's not one or the other, it's always both in tandem.

The practical answer is that during extreme weather, there are never enough people willing to voluntarily freeze. The demand for heat when it's below freezing in a state where homes aren't insulated and people don't own winter clothing is relatively inelastic.

>The practical answer is that during extreme weather, there are never enough people willing to voluntarily freeze. The demand for heat when it's below freezing in a state where homes aren't insulated and people don't own winter clothing is relatively inelastic.

Not exactly. While it's true that people are willing to pay infinite dollars to not freeze (aka stay alive), there are a variety of ways to do it that don't involve using electricity. eg. starting a fire (risky I know), or cohabiting with relatives.

Now you have a choice between paying extortionate amounts of money for electric and ruining your largest asset, your house, and potentially ending up in hospital with hypothermia.

But remember, there literally wasn't enough power to heat everyone's homes.

In a simplified universe where everything is as described in an entry-level economics textbook, this variable pricing system saved everyone. People with health conditions or particularly valuable homes were willing to pay exorbitant electricity rates, everyone else turned off their power, and they all lived happily ever after.

Real life, of course, is more complicated.

Real life is more complicated, but people misunderstand where the complexity is hidden. The textbooks aren't wrong. The basic mechanics are sound. The worst part by far is that we can't expect everyone to understand how markets work. It's not just a matter of applying markets everywhere, it's a matter of understanding when markets are useful, when they have to be supported by fallbacks and when it makes sense to have no market at all.

For example. There is a pretty basic assumption without which markets cannot function. That is the assumption that people actually know and compare prices instead of just buying things where they don't even know how much it costs. People don't spend their lives staring at wholesale electricity prices all day. What's needed are electronic devices that do this busywork for us. If each outlet had its own price sensitive breaker we could just set up some price caps on each outlet and disable nonessential devices or turn down the thermostat.

The problem with cutting power like that is it creates further externalities that society has to pay for.