How the European economic area electricity trading market failed into Gresham's Law dynamics and how to redesign it
Year: 2026
Type: article
Abstract: The current European Economic Area electricity trading was established to lower retail prices and secure the supply of power to its customers. However, the results are the opposite. Prices have increased and the supply of power has become less stable after the integration of variable renewable energy sources, such as solar photovoltaics and wind power. The failure to account for the fact that power from intermittent energy sources differs fundamentally in quality from the power generated by dispatchable energy sources has transformed the trading system into one governed by Gresham's Law. Also, the system has changed its behavior from complicated and probabilistic to complex and uncertain due to the covariation in weather patterns over large swaths of land. The result is growing market volatility and escalating costs. A major part of the uncertainty associated with this complexity is ontological. The proposed improvements to the risk management of the power grid are insufficient and may make the situation worse because it suggests that there is, contrary to findings in complexity science, a solution to ontological uncertainty. This paper is novel in using Gresham's Law and complexity science, and it proposes two new rules for the trading system to drive the power grid away from Gresham's Law dynamics. The purpose of these new rules is to prevent the power grid from becoming a truly complex adaptive system with power law dynamics, which would make it impossible to reach its original objectives of low prices and stability at manageable risks.
Source: Energy Research & Social Science
Author: Jan Emblemsvåg
Institution: Norwegian University of Science and Technology
Language: English
Subfield: Electrical and Electronic Engineering
Field: Engineering
Domain: Physical Sciences
Open Access status: hybrid
Estimated APC paid: $3,450
OpenAlex ID: W7221522476