A Net Zero grid entails a complex, multi-directional exchange of both energy and data. While neutral marketplaces are widely acknowledged tools for optimising resource allocation across multiple parties in fintech, additional dimensions need to be considered in energy. The physical limitations of the grid and managing the risk of extraordinary events and power loss, for example.
A neutral marketplace in energy can still be accomplished with careful market design. However, three additional, support pillars are needed to underpin all effective, market-based exchanges, to help these marketplaces scale:
1. Pillar one: A whole-systems approach, coordinated by an entity with overall responsibility
In the UK, we’re calling this the Future System Operator or FSO.
The FSO will take on the role of a trusted and expert independent body. This will ensure a coordinated approach to strategic system planning, through whole system thinking.
This entity must also be able to enforce marketplace neutrality to encourage competition and innovation.
2. Pillar two: An architecture that supports an open ecosystem of third-party platforms and services
Just as a single party would be unable and ill equipped to build out all the physical infrastructure required for the Net Zero transition, a single entity would not be best placed to build all the digital infrastructure.
However, a well-designed, technical architecture can allow third-party platforms to continuously compete and innovate. This will ensure the delivery of the best services as the needs of the system evolve.
This architecture would therefore require a two-way data exchange and standardisation of processes, to ensure visibility and lower barriers to entry for flexibility service providers.
3. Pillar three: Shared tools and digital infrastructure to allow the smooth transfer of data within that ecosystem
This brings us onto the third pillar. The right tools – such as the Data Sharing Infrastructure (DSI) and Automatic Asset Registration – will allow for a streamlined transfer of data across these multiple, potentially competitive third-party platforms and services. At the same time, friction for participants in those markets will be minimised.
These three pillars are crucial for the optimisation of every variable, distributed, digital Net Zero grid. However they’re currently being implemented and enforced in different ways across the UK, Europe, and US.
In a three-part blog series, Electron experts will dig into how each of these three pillars are currently being established in the UK. This will set the scene to allow flexibility markets to scale into the future.
We’re interested to learn how you see these neutral marketplaces coming into effect in your regions. Please reach out to discuss these concepts further – book a chat.
