The Virtual Electricity Market

Application to Congestion Pricing

An Electricity Market exists to give consumers choice over who generates their electricity

This means that a residential buyer in Cornwall can actually select a Scottish generator to fulfill

his/her power needs.

In fact more generally, customers have a choice of both supplier and generator

Meaning that Regional Electricity Companies (RECs) who were formerly limited in scope to a

specific geographic area

could now (theoretically) meet the needs of any citizen in any part of the UK

This was groundbreaking

It meant that poor service was no longer excusable

and would result in consequences

That a REC could not rely on a captive catchment area

Now think about this - we did this with food and retail markets by liberalising the rules to allow

anyone to sell anything to anyone anywhere

You buy your groceries from Amazon or Ocado, not just the store nearest to you

Yet for transport, education and health, we still generally do the captive market thingio

And it seems that transport underpins the catchment problems of both health and

education

So let us consider what happens in the electricity markets

Every morning, the generators put out offers of how much they are selling power for

The less competitive producers cannot sell as much as the more efficient ones and thus have

to raise their game in order to compete.

If we had a similar situation for transit, hopefully, smelly, rude, tardy drivers with

clapped-out vehicles

would not be able to remain in the transport industry for very long

They would either get better or get eliminated

And if the consumer insisted on clean air standards

(or better still - there was a non-trivial cost attached to polluting the air)

we would see that problem taken care of by market forces

(read - the cumulative opinions of millions)

faster and more completely than by the blunt instrument of regulation

So, what if we had an operator auction off roadspacetime slots every day

And that people who needed travel bought access to these slots

Which is what tolling is except that tolls generally do not take into account time of day

except by discontinuous jumps in price

And using ideas from Vickrey, we could have variable tolls easily enough

Which would change the price per seat of any type of vehicle on a particular road at a

particular time

Making it nonsensical to drive a single occupancy car into a city at peak times

There wouldn't even be a need to check how many occupants were in the car!

But you would not care since you could rideshare

either in your own private car , in a third party's private car

in a rented (by you or someone else) vehicle

or in a carpool, vanpool, bus or taxi

whichever option suited you best at the time

You would be able to make cost comparisons and even better

mix and match transit options depending on your circumstance

Some days, riding with friends would be better

Others, taking a professional vanpool or carpool

You could even then calculate a price for letting someone else use your car while you were away,

based on road conditions and demand for transport

Which would be a statistic available to you

We would see bus companies using the system able to quote dynamic prices to customers in

addition to changing the schedule of their vehicles to suit their customers

You would get one price for having a bus come to your front door at a specific time

and another (hopefully much lower) price for a flexible (for the operator) departure time from a

transit hub

Freedom To Choose is the whole point here.

This is what a Transit Exchange

is all about

Clearly, all of these things won't happen in one step

Or overnight

We can start with auctioning seats in buses / taxis and limousines at certain times

available via SMS, smartphones, iPads and the web

for certain groups of people

which means in the early stages, other groups may not immediately see the applicability to

their needs

but this is merely a marketing and positioning proposition

not a problem with the business model

Poco a Poco

Step by Step

Then we can move to selling seats in private or rented cars

trains, private jets, ferries and yachts

And then the system would allow anyone with a vehicle and the appropriate licence to become a

"producer"

One final thing to mention is that a transit market has certain characteristics

which are not dissimilar to electricity markets

namely constraints of supply

there is only so much road and only so many vehicles that can fit on that road

in sparsely populated locales, demand for transport may have a lag time as vehicles will

have to be brought there

In LMP markets, where constraints exist on a transmission network, there is a need for more expensive generation to be dispatched on the

downstream side of the constraint.

Prices on either side of the constraint separate giving rise to congestion pricing and constraint

rentals

A constraint can be caused when a particular branch of a network reaches its thermal limit

or when a potential overload will occur due to a contingent event (e.g., failure of a generator or transformer or a line outage)

on another part of the network. The latter is referred to as a security constraint.

Thus transmission systems (roads) will have to be operated to allow for continuity of supply even if a contingent event, like the loss of a main route, were to occur

This is known as a security constrained system

This is known as a

security constrained

system

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