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Published on December 14th, 2015 | by Tobias Engelmeier

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Why We Need “Green Market Design”

December 14th, 2015 by  



Green market design is the need of the hour. Renewables and energy efficiency solutions have reached meaningful parity with conventional energy sources in many parts of the world. The timing is extremely opportune. It presents a historic coincidence. Firstly, just now, many fast-developing countries in Asia, Latin America, the Middle East, and Africa are getting ready to design and build their future energy system. They have choices today that were not available even 5 years ago. Secondly, the need is evident to change our energy systems very quickly to avoid the worst effects of climate change. We now have the opportunity to nudge countries towards creating a modern, renewables-based energy system before traditional path dependencies set it.

From Government Initiatives to Green Markets

However, many developing countries lack the institutional and business framework to grasp this opportunity in a rapid manner. Their challenges are often similar: low contractual security, high cost of debt, weak infrastructure, and erratic, non-transparent politics. Even more importantly, many developing countries follow very statist economic and industrial policies. They have little knowledge about green market design – which is exactly what is needed at this point, where renewables and energy efficiency technologies step out of their protected niche to offer mainstream energy solutions.

Architects of Green Market Design

I want to bring together a group of “Green Market Architects” to provide excellent, directly usable toolkits for regulators, for entrepreneurs, and for investors and banks. Today, these three crucial market stakeholders are still fending for themselves. They also lack insights into each other’s decision-making processes. How can that brilliant solar entrepreneur in an Indian second-rung city be supported? He needs best in-class information about financing, business models, sourcing, or contracts. How can a well meaning regulator be munitioned with ideas, arguments, data, and examples? He would want to reduce risks, increase opportunities, and fight vested interests. Investors need reliable, business-relevant, and inspiring analysis. At my previous company, Bridge To India, we sought to provide that as consultants to paying customers and we also provided free analysis. However, the more detailed, comprehensive, and insightful paid work also should be made available to everyone — it is a common good in the green market of the future.

I am just starting to think about this: ideas, suggestions, support — all are very welcome. Let’s create a knowledge commons for green market design.





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About the Author

is working towards a low carbon world. He believes that this is a great opportunity rather than a sacrifice and that it will be driven by business and economic fundamentals rather than by political directive. Developing countries, who can still make a choice about their future energy infrastructure, are in a particularly good position to get the most out of the renewable energy and energy efficiency solutions available. The good news is: A global energy transition is inevitable. The bad news is: current market designs in most countries are not conducive enough and could delay this inevitable transition for just too long to save our climate. So that is what we need to work on: better market designs. (Disclaimer: views in motion...) Companies I am involved with: TFE Consulting (www.tfeconsulting.com) www.bridgetoindia.com (sustainability solutions for India), www.indiagoessolar.com (helping consumer go solar in India), www.gridhub.com (the business platform for the global renewables industry).



  • JamesWimberley

    My pennyworth: an ounce of experience is worth a pound of papers. Millions of acres of the Sahel in Niger have been rehabilitated because years back Oxfam paid for a go-ahead Nigérien farmer called Yacouba Sawadogo to visit Mali and see at first hand a dry-land farming and tree-planting solution some Maliens had worked out (link). It’s much more important to bring somebody who has made something work – especially in another developing country – than to present pretty slides with the optimum solution. These invite the reaction “But it can’t work here because …”

  • mike_dyke

    One of the main problems with today’s market is that utilities provide the grid infrastructure and also generate power. This creates a conflict of interest within the company and also accusations of favoritism.

    What’s needed is a structure along the same lines as the UK grid – One company (possibly owned by the government) deals only with transmission of electricity and is not allowed to generate/sell any electricity. It’s supported by a small charge on each unit of electricity passed over its system. All other companies generate and sell electricity directly to consumers.

    This creates competition amongst the generating companies and allows the customer to pick and choose whichever company they want without having to be tied into one company because they own the cables to the premises.

  • ROBwithaB

    The current economic model, dominated by monopoly utilities, needs to change.
    Whilst it might have been appropriate when only a limited number of large, very expensive power plants produced all the electricity in any particular area, it isn’t suited for distributed generation.
    If you’re obliged to buy all your electricity from one particular company, that’s bad enough, but if you have to then SELL all your electricity to that company as well, there can be no talk of a functioning market.
    In order for renewable energy to achieve a significant share of electricity production, it is imperative that mechanisms be provided to mitigate the intermittent nature of production inherent in wind and solar.
    The only sensible way to do this, IMHO, would be to provide accurate pricing signals to the market at all times. This would allow intelligent systems to decide the most appropriate course of action in near real time.

    A producer could decide to either shed or store or self-consume or sell to “the market”, depending on the price. Consumers can similarly decide the best course of action. (In practice, the actual decisions would be taken by machines, based on predetermined rules.)
    In addition to producers and consumers, we can expect that such transparent flow of information would quickly lead to an opportunity for arbitrage specialists, aggregators, and storage providers.
    Supply and demand will reach equilibrium within a narrow threshold, without the need for massive overcapacity.

    But all of this can only happen if people are free to buy and sell from anyone, rather than just the monopoly.

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