The Power Market: E-Commerce for All Electricity Products

Fortnightly Magazine - February 1 2000
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Why not use the Web to buy and sell transmission rights at prices derived from bids and offers?

You make an offer, I accept. You deliver a product, I deliver money. This simple construct works well in just about any industry you can name. When a willing buyer and seller negotiate a contract, each achieves an outcome he considers best. Moreover, each is obliged to meet the needs of the other - reliably. No central authority sets the price or allocates supply. We depend on markets for reliable production and delivery of other essential goods; why not for electricity?

Now comes the Internet, with the promise of an electronic exchange for many commodities. Food, books, and wholesale commodities, such as steel, already trade over the Web. Electricity, so far an exception to this trend, is an ideal commodity for e-commerce. It is delivered by wire and controlled electronically. The technology of e-commerce is well suited to the real-time matching of supply and demand required by electric power markets. Why not use the Internet wires to trade electricity?

In fact, why not use the Internet to trade all power products, including (a) the electricity commodity, (b) the transmission rights needed for delivery, and (c) the ancillary services that support the grid?

In the United States, the Federal Energy Regulatory Commission has called for the development of regional transmission organizations (RTOs), to better coordinate markets and foster reliability. Yet buyers and sellers still find it difficult to negotiate and deal, even where electric markets have been "deregulated." That is why the FERC cannot afford to miss this historic opportunity to encourage truly competitive markets as it forges a new transmission sector.

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