How do power markets improve grid resilience and prevent outages?

How do power markets improve grid resilience and prevent outages?

For energy markets to avoid volatility, unpredictability and wide-scale outages, they must address the looming issue of grid reliance. With growing challenges from renewable integration of all types, the threat of extreme weather on infrastructure and and ever-rising demand for energy due to electrification, regulatory frameworks, market mechanisms, and technologies must be employed to strengthen grid resilience. Recent blackouts experienced in the USA and the UK only go further to highlight the vulnerabilities currently in play. One thing is for certain: maintaining energy security is a high-priority issue for energy markets around the globe. 

Market mechanisms to enhance grid resilience 

Capacity markets are an element of the British government’s Electricity Reform package. This package aims to ensure available back-up generation for more volatile sources of power, such as renewables and other low-carbon sources. It’s also designed to increase the upgrade of older power stations.  

Ancillary services, on the other hand, aim to keep power grids operating correctly to avoid power outages. Continuous corrections manage frequency and voltage control and attempt to restart the power grid as quickly as possible during a blackout.  

Real-time and day-ahead market coordination can also be implemented for reliability. By mitigating risk with an overview of energy price increases or decreases, this helps safeguard the grid against price spikes, keeping the energy moving in line with demand.  

The role of technology and data in outage prevention 

AI will play a key role in outage prevention in the future, utilising the dual technologies of AI and IoT for grid visibility and automated response to issues. As smaller pods of energy generation communicate over the wider grid, AI can process data, identify patterns, and predict large-scale outages before they happen. Automated systems have the potential to perform predictive maintenance, with real-time monitoring detecting issues in advance and fault detection systems detecting issues as they happen, taking both a proactive and reactive role in preventing power outages.  

Supporting flexibility through demand response and storage 

It’s key to the future stability of the grid that consumers are encouraged to shift or reduce energy use, as this alleviates strain on the grid by balancing the supply and demand of energy from energy consumers compared to how much power plants can produce.  

Battery storage plays a key part in peak shaving, which involves storing energy when it is being generated at an off-peak time to be used at a later period when energy is at peak demand, alleviating strain on the grid and offering more cost-effective energy. Batteries also play a part in frequency regulation, which is when power output is adjusted to stabilise the grid's frequency at short notice. This technique ensures power quality is maintained even during high demand periods. Virtual power plants can also help to balance energy quality and help to stabilise the grid. They do this by aggregating flexible loads - which could be industrial or residential energy procurers - and adjusting each load depending on supply and demand requirements. This is important in demand response programs, which motivate consumers to consume energy outside of peak demand hours - charging electric vehicles overnight, for example.  

Renewable energy and the challenge of intermittency 

The variability of wind and solar can be balanced without compromising stability, for example, via the installation of both types of renewable energy at one plant. This balances the energy generated because when one type of renewable energy does not have the correct conditions to be generated - for example, there is no wind to generate wind energy - the other can compensate. These co-located installations can also be incorporated into microgrids and combined with battery storage to make the microgrids more stable. These systems are known as hybrid systems. Grid-forming inverters can also help stabilise the grid when several sources of energy feed into the same network. They control the frequency and voltage of the grid, which, when combined with dynamic line ratings, allow transmission lines to carry even more energy than the expected capacity in certain situations.  

Policy, regulation, and investment is key to future grid resilience, for example through pro-renewable policies. This could take the form of financial incentives for renewable technologies, such as subsidies or feed-in tariffs. National and regional regulatory responses are also crucial, such as the EU Clean Energy Package, which aims to encourage decarbonisation on a continent-wide basis. Infrastructure investment is equally important, with funding to be made available for the sometimes costly investments associated with rolling out renewable infrastructure.  

Case studies: power markets adapting to build resilient grids 

California ISO (United States)

• Role: operates the wholesale energy market and manages high-voltage power transmission.

• Focus: grid reliability during extreme weather events.

• Key Measures:

  • Implements flexibility programs to balance supply and demand.

  • Uses a consumer alert system to notify the public when the grid is under stress.

  • Encourages reduced energy consumption during peak strain periods.

Nord Pool (Nordic Region)

• Role: integrates regional energy markets across Nordic countries.

• Focus: renewable integration and market efficiency.

• Key measures:

  • Promotes renewables and interconnectivity via advanced trading platforms.

  • Offers hourly renewable energy certificates to improve transparency and market efficiency.

AEMO (Australia)

• Role: coordinates national electricity markets and grid stability.

• Focus: emergency response during bushfires and extreme weather.

• Key measures:

  • Deploys emergency back-up power during crises.

  • Encourages industrial and residential load reduction to manage demand and avoid price surges.

  • Future plans:

    • Install battery storage in strategic locations for power continuity.

    • Bury power lines to protect infrastructure from fire damage.

From AI to storage, power markets are evolving fast to prevent outages. Resilience is now essential for reliable, flexible, and future-proof energy systems.