How do marketplaces work? What do they do? What's the future?
Electrical energy markets compete for the largest marketplace in human history, being responsible for settlement of what could be considered the most critical product to people, the power running through their properties to keep electrical appliances, machines, and now many people's mode of transportation, operating. This market is where the fundamental cost of living in a modern society is determined. If the market determines that the electricity necessary to keep your family's home warm is over your budget in such a scenario, this is fundamentally the case outside the case of subsidies.
It is also a market where the most significant amount of human energy consumption behavior can be shifted, if desired by the market designers. For what benefit would a marketplace attempt to shift peoples' energy consumption behavior?
- 1.Reducing the cost of electricity generation, such as the case of increasing reliance on less efficient but more flexible methods such as natural gas peaker plants
- 2.Reducing emissions associated with electricity generation, such as the above mention gas peaker plants or a scheme such as renewable energy feed in tariffs
- 3.Shifting consumers away from a momentary situation where congestion or some other strain on the electric grid infrastructure is increasing the risk of a grid failure
- 4.Reducing more long term infrastructure investment costs, such as having to build out additional transmission lines because of consumption spikes in a certain geographical region that otherwise has much lower consumption levels normally
Marketplaces overall are excellent and possibly humanity's best method for coordinating people both in a more voluntary but also more efficient and streamlined manner. In the more recent, modern history of the electric grid in places like the United States, there has been a move over to reliance on marketplaces for determining how to price power and therefore allowing consumers to decide for themselves how to handle their behavior as well as for infrastructure investors and builders to decide how to operate.
At DexGrid, we believe that the future of these marketplaces has the potential to accelerate a shift over to more resilient power systems that, at the same time, cause less damage to the environment we all live in and rely on. Starting in Puerto Rico, a society fallen behind when it comes to the power grid, we are building a digital abstraction of the power system and designing it in a manner which will deliver the optimal power consumption experience for a society with a very great need but underneath this, a gigantic potential paired with this optimized energy future.
The electric grid system is still representative of its relatively old origins, dating back to the electrification of cities in the 1890s. From the start, electric grids relied on large, inflexible sources of power like hydroelectric dams. Since then, most electric production has still come from large sources of power, mainly fossil fuel generation, and both electric grids and the marketplaces operating them have reflected this through today. What has begun to challenge this model now is primarily renewable energy sources of wind turbines and solar powered generation. The main differences of these sources is:
- 1.They are zero marginal cost sources of electricity (they do not cost more based on additional electricity generated; operators pay up front for the installation and from there, the energy is free as long as there is wind or sun passing through)
- 2.They are non-dispatch-able (the operators cannot decide and control how much power is being generated at any one moment or plan to do so based on predicted demand)
While the first element is clearly a net positive in some respects (as long as the installation and equipment is not too expensive, society can benefit from the lack of cost of solar and wind energy), the second certainly is not. The current marketplace of the grid places a significant premium on flexibility from generation.
What's missing that puts a roadblock to society benefiting from the first aspect is that our marketplaces do not account enough for flexibility not just from generation but also from the consumer side.