I’d like to humbly add that as power generation, storage, and consumption become increasingly decentralized, flexibility should also move closer to the local level. Storage and consumption could follow local production patterns, reducing the need for central steering, and markets might shift to more automated, local mechanisms.
We actually ran a startup in Europe doing exactly this—predicting local energy production patterns in the LV grid, optimally using thermal and electrical storage, and shifting consumption automatically into those time slots. It worked well, but it ran counter to the traditional centralized industry, and unfortunately we were forced to close and let all our employees go.
"Traditionally, demand for electricity was considered inelastic. Flipping a switch was a mechanical action, and no consumer wanted to monitor prices or adjust behavior manually. But digital automation changes that equation. Smart devices, sensors, and programmable controls make it possible for demand to respond in real time to system conditions without requiring constant consumer attention."
A brilliant comment. The inelasticity assumption has been proven so wrong. When I implemented Real Time Pricing in Georgia in the 1980's. as had happened in Niagara Mohawk's Trial, coincident peak demand dropped by 10-20% and overall consumption went up by 5ish% as I recall. Good result for Georgia Power.
And as you note, device intelligence can now react in real time to shortfalls, as reflected in price changes.
And yet, Gary Ackerman sent me an email today saying he had noticed European markets only now trying to use a market-based mechanism to solve the hourly pricing issue. Heck. That was noticed in PJM in the 90's where a scheduled power flow would not be cut, despite flowing in the "wrong real-time price direction" b/c the "average" hourly power price was applied to the transfer. They fixed that PDQ. But Europe has not caught up. Yet!
Power is the most "instantaneous" commodity, shadow-priced every 4 or so seconds (the update interval on my coal plant in SA when I operated them there.) In a crisis, it's updated (and calculable) instantly.
Power markets have to use the communications capabilities of today to become efficient.
Thank you for these insights.
I’d like to humbly add that as power generation, storage, and consumption become increasingly decentralized, flexibility should also move closer to the local level. Storage and consumption could follow local production patterns, reducing the need for central steering, and markets might shift to more automated, local mechanisms.
We actually ran a startup in Europe doing exactly this—predicting local energy production patterns in the LV grid, optimally using thermal and electrical storage, and shifting consumption automatically into those time slots. It worked well, but it ran counter to the traditional centralized industry, and unfortunately we were forced to close and let all our employees go.
We must build out robust liquidity on screens. CLOB trading is the most effective way to keep prices reasonable.
Thank you this was really good!
"Traditionally, demand for electricity was considered inelastic. Flipping a switch was a mechanical action, and no consumer wanted to monitor prices or adjust behavior manually. But digital automation changes that equation. Smart devices, sensors, and programmable controls make it possible for demand to respond in real time to system conditions without requiring constant consumer attention."
A brilliant comment. The inelasticity assumption has been proven so wrong. When I implemented Real Time Pricing in Georgia in the 1980's. as had happened in Niagara Mohawk's Trial, coincident peak demand dropped by 10-20% and overall consumption went up by 5ish% as I recall. Good result for Georgia Power.
And as you note, device intelligence can now react in real time to shortfalls, as reflected in price changes.
And yet, Gary Ackerman sent me an email today saying he had noticed European markets only now trying to use a market-based mechanism to solve the hourly pricing issue. Heck. That was noticed in PJM in the 90's where a scheduled power flow would not be cut, despite flowing in the "wrong real-time price direction" b/c the "average" hourly power price was applied to the transfer. They fixed that PDQ. But Europe has not caught up. Yet!
Power is the most "instantaneous" commodity, shadow-priced every 4 or so seconds (the update interval on my coal plant in SA when I operated them there.) In a crisis, it's updated (and calculable) instantly.
Power markets have to use the communications capabilities of today to become efficient.