A few interactions this week have got me thinking about how we build the energy system for the future.
The classic definition of the energy system problem as a trilemma doesn’t really explain what we need to do to transition the system. The trilemma – being affordability, environmental and security of supply.
We could say…
It’s an investment problem. I was at a gathering earlier this week where this was a big thrust of the conversation. If we stimulate the investment sufficiently then we will build GWs of wind, tens of nuclear power stations, and this will deliver a low carbon system.
It’s a network problem. Also mentioned at the gathering and again yesterday by one of my colleagues was the grid problem – it’s about building the grid that connects supply and demand, and then balancing the power on this. We achieve nothing without this.
It’s a markets problem. The physics of the system will only work if the money flows to support the operation of the energy system. Unless people get paid, they won’t do anything. Unless the price to consumers is perceived as fair there will be a backlash against the Energy Transition.
It’s a government problem. I’ve heard repeated calls for the ministers, government departments, and regulators to set out their vision of the future more clearly. The lack of this creates uncertainty and global investment and supply chains move on to the next country.
It’s a consumer problem. Heard many times this week, is the imperative that we can’t build a system for the 5% of people that can afford Teslas, we need to build it for the 95% who are currently struggling with affordability.
How do we break into this problem? When faced with a multi-dimensional challenge, we cannot solve all sides of the Rubik’s Cube at the same time. We must choose where to start.
My hypothesis is that we need to start with Market Design. This is the glue that holds the whole energy system together. The market needs to be designed to transition us to low carbon energy, it needs to incentivise investment, it needs to be fair to consumers, it needs to balance the network.
My call to action is for us all to go deep into the design of our future energy markets and start to solve our problems from there.
