The Economics of Decentralised, Asynchronous Grids

What this work package addresses

• The Continental Europe Synchronous Area is one 50 Hz machine spanning 32 countries: operators must solve instantaneous power balance, congestion-free lines and sufficient inertia all at once.

• As renewables rise this becomes costly — volatile and even negative wholesale prices, surging redispatch expenditure and growing curtailment.

• The neglected question: once the grid is asynchronous and packetised, how should balance, congestion and inertia be priced and managed?

How it proceeds

1. 01

   Formalise two synchronous-grid challenges — power balance and transmission congestion — with standard electricity-market theory, then show how an A-grid shifts from power balance to energy balance.

2. 02

   Energy Routers make demand price-elastic and a storage buffer trims net load, so the market clears one step lower in the merit order (from gas at €90/MWh to coal at €50/MWh in the worked example).

3. 03

   A Local Market Operator runs a continuous double auction with predictive forecasting, elasticity mapping and autonomous bidding; line capacity becomes a variable inside the auction (Flow ≤ Capacity) and congestion is priced continuously and locally rather than corrected after the fact through redispatch.

4. 04

   Design risks are discussed: sensitivity of dynamic pricing to forecasting error, and the incentives of incumbent grid operators earning rents on sunk assets.

SAFErGrid economic value

Price elasticity plus a local buffer move the clearing price down the merit order; congestion is priced continuously and locally instead of being corrected after the fact.

What this work package addresses

• Spinning turbines store kinetic energy that slows the rate of change of frequency; converter-decoupled renewables carry no rotating mass, so system inertia falls as their share rises.

• Low inertia has caused near-collapses — the CESA split of 8 January 2021 and the Iberian blackout of 28 April 2025 — turning stability from a free by-product into a high-cost, procured service.

• Today inertia is shadow-priced through redispatch: the must-run unit the TSO keeps online sets the cost, chosen after the merit order with no competitive discipline.

How it proceeds

1. 01

   SAFErGrid replaces RoCoF with Action Energy, a local energy-domain stability metric; the Energy Router turns the required Action Energy into a price signal, and virtual inertia is supplied by BESS along a merit-order curve.

2. 02

   Inertia is formalised as a club good: compartmentalisation shrinks a continent-wide free-rider problem into a small, tractable local one, excludable via a metered, priced DC interconnection.

3. 03

   A welfare comparison shows an explicit virtual-inertia market can always replicate — and only improve on — the shadow-cost dispatch of TSO redispatch, with gains rising as provider costs diverge.

4. 04

   A real-options perspective treats a charged buffer as a call option on a stability event, whose value rises with volatility; the long-run revenue-adequacy (“missing money”) problem is addressed through capacity contracts or availability payments.

SAFErGrid economic value

Virtual inertia becomes a traded service whose price falls as batteries scale; volatility that threatens a synchronous grid becomes option value in a storage-rich one.

What this work package addresses

• Beyond fixing balance, inertia and congestion, the architecture is itself a source of innovation — but much of it still has to be invented.

• A layered, internet-like grid of autonomous sub-grids connected by smart Energy Routers opens three related channels for innovation: technology, platforms and finance.

How it proceeds

1. 01

   Technology & R&D: a to-do list for engineers — mass-producible bidirectional Energy Routers (solid-state transformers on SiC/GaN), deterministic sub-millisecond communications (TSN, 5G/6G URLLC, PTP), real-time Action-Energy sensing and grid-forming inverters.

2. 02

   Platform business models: separating physical routing (Layers 1–3) from a programmable Energy Application Layer creates a multi-sided platform on which third parties build dynamic pricing, quality-of-service contracts and peer-to-peer trading, with the router earning an app-store-style routing fee.

3. 03

   Real options: each router-plus-buffer is a call option on flexibility whose value rises with volatility; via CAPM, decoupling can lower systematic risk (β) — routers isolate shocks, costs shift from volatile fossil OPEX to near-riskless CAPEX, and buffers earn most during system stress.

SAFErGrid economic value

A shortcoming of the old grid — volatility — becomes a source of value in the new one; the open challenge is keeping the platform operator from exercising monopoly power over its ecosystem.

What this work package addresses

• The German puzzle: renewables reached 59% of supply and pushed generation costs down, yet households pay among the highest electricity prices in the world and energy poverty is rising.

• The culprit is the grid-fee component of the bill — 25–30% of it — levied to recover the cost of congestion and redispatch on the centralised synchronous grid, and regressive in four ways.

• Current reforms — dynamic tariffs, time-variable grid fees under §14a EnWG, a €6.5bn subsidy — treat the symptom, and risk rewarding households with heat pumps, EVs and batteries while poorer households face a net cost increase.

How it proceeds

1. 01

   Measure energy poverty with the Ten-Percent Rule, Low-Income High-Cost, subjective and arrears indicators; identify one-person, non-working and lower-education households as most at risk.

2. 02

   Trace the cost chain from redispatch to grid fees to household tariffs, showing why the fixed component, self-consumption by wealthier homes, regional exposure and industrial exemptions make fees regressive.

3. 03

   Channel one — the level of the bill: eliminating the redispatch that drives grid fees; grid fees alone account for roughly 650,000 households in energy poverty, about 15% of the national rate.

4. 04

   Channel two — the structure of the bill: Quality-of-Service pricing lets a household pick a lower reliability tier for flexible appliances, so fixed costs are recovered from those most willing and able to pay rather than spread uniformly and regressively.

SAFErGrid economic value

Two channels out of household energy poverty: lower average bills and a fairer bill structure — while promoting access to smart meters and home energy management.