NOBEL PRIZE WINNERS, TO HELP RENEWABLE ENERGY
image credit: Nobel Academy
- Oct 19, 2020 4:07 pm GMTOct 19, 2020 2:19 pm GMT
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2020 Nobel Prize winners for Economics, Paul R. Milgrom and Robert B. Wilson of Stanford University, would like their prize-winning improvements in auction theory and inventions of new auction formats to now focus on being able to help the developing renewables industry.
Dr. Migrom stated in his press conference that what they do with “market design is try to think about all the aspects of the systems – competition, distribution, solving hard complex problems,” which applies to how commodities and scarce resources are traded and ensure that the system can actually handle the task.
Moving beyond academia to practical applications benefitting society, (mostly in the arena of governments awarding Radio Frequency contracts), the Professors already have on the ground experience of taking their research to society. This was reiterated in the press release from the Swedish Academy stating how their “discoveries have benefitted sellers, buyers, and taxpayers around the world.”
Dr. Wilson brought up the challenge of applying his theories to the renewable industry at his press conference, discussing, according to the New York Times about why he is interested in “designing new auction formats for complex situations.”
Better design can apply to a couple of areas where auctions happen for renewables. The first being auctions for Solar PV and Wind plant set up. Here, bids translating price power is sold at for the long haul are auctioned – something solar companies are quite comfortable with.
There is so much involved with land procurement, set up, calculations on selling price of output by competing vendors that it’s hard to simplify. Additionally, objectives beyond price – including timely completion and solar / wind integration, as well as industrial, labor and socio-economic policies factor in to make it a hard arena to apply an auction format.
The true action is, and will keep growing to be in Energy Trading, as millions of bids, and timelines compete with a very real commodity (electricity) to be traded. Here, energy production is sold to utilities by energy providers, and is measured against the needs of the grid. This is where the grid would need to maximize price through multiple concurrent auctions.
This area received a lot of attention with the rolling blackouts in California at the end of August. Initial news reports implied that the grid was impacted by the demands of renewable energy integration colliding with the need for consistent power. Even if that was not the reason, transitioning to a grid with the utilities handling a larger percentage of renewables with fluctuations of demand, not neatly lining up with availability of supply will be a challenge for utilities in the upcoming years.
New auction models in this space are necessary as after all, a solar company can be selling electricity for day ahead today, but next month, the utility may need to be buying at a week ahead. For this to be effective, and successful, two areas are imperative and luckily both are moving forward at a rapid clip.
The first is improved forecasting through AI based methods as AI sees patterns in humongous amounts of data, not visible to humans so that both utilities and solar companies are best prepared with what they need.
The second is where Nobel Prize winners may really be able to help the industry with. This was best told directly by Professor Wilson, to Bloomberg Television. “We have all these needs now for energy from solar power, from wind, that’s quite variable, so we need to create new kinds of markets … variable resources to keep the supply provided to meet demand.”
Absolutely we do need to create new kinds of markets, Professors Wilson and Milgrom. We, the industry would super excitedly be waiting for you to improve their working to make renewables even more competitive and the grid even more effective. Thank You. We’re lucky that you are hard at work and pushing boundaries at an age, 83 and 72, where your contemporaries have long since retired and we look forward to benefitting from your combined wisdom.
Oh, and congratulations on the Nobel prize!