Scarcity Propagation
Overview
Distributed price formation allows every holon to compute a local price based on the resources under its control.
The remaining challenge is coordinating these local markets.
How should scarcity detected at one level of the electricity system influence decisions made elsewhere?
FP-AMM achieves this through constraint propagation.
Rather than communicating every measurement or network state throughout the entire electricity system, each holon communicates only the economic consequences of its local constraints.
Scarcity propagates through prices.
Constraints Exist Throughout the Network
Every level of the electricity system has physical constraints.
For example:
| Holon | Example Constraints |
|---|---|
| National System | Generation adequacy, reserve margin |
| Transmission | Thermal limits, stability |
| Primary Substation | Transformer loading |
| Distribution Feeder | Current limits, voltage |
| Household | Connection capacity |
| Device | Charger rating, battery limits |
These constraints exist simultaneously.
A transaction is only feasible if every constraint along its path can accommodate the requested power.
Local Constraints Remain Local
An important principle of FP-AMM is that each holon only manages the resources under its own control.
A feeder does not optimise the national transmission network.
A household does not monitor every transformer in the country.
Each level continuously estimates only its own operating state.
This keeps computation local.
However, local decisions must still remain consistent with the wider electricity system.
Constraint propagation provides this coordination.
Propagating Scarcity
Suppose a distribution feeder begins approaching its thermal limit.
The feeder detects increasing scarcity.
Rather than broadcasting detailed engineering measurements to every participant, the feeder simply increases its local scarcity price.
That higher price propagates to every transaction requiring use of that feeder.
Participants do not need to know why prices have increased.
They only need to observe the economic signal.
Flexible devices naturally respond by reducing demand.
The local constraint is therefore respected without requiring central scheduling.
Propagating Abundance
The same mechanism applies during periods of abundance.
Suppose a region experiences very high solar generation.
Network loading is low.
Renewable curtailment becomes increasingly likely.
The local scarcity price decreases.
Consumers connected through that part of the network observe lower prices.
Electric vehicles begin charging.
Heat pumps increase output.
Batteries absorb excess generation.
Demand naturally moves towards areas where surplus energy exists.
Again, only prices are communicated.
The detailed physical state remains local.
Constraints Cascade Through the Holarchy
Consider an electric vehicle requesting to charge.
The request affects every level of the electricity system.
Electric Vehicle
│
Household
│
Distribution Feeder
│
Primary Substation
│
Transmission Region
│
National System
Each holon independently evaluates the request.
If every level possesses sufficient capacity, the transaction proceeds normally.
If any level becomes constrained, its local scarcity price increases.
That increased price propagates back towards the participant.
The participant therefore responds to the most restrictive constraint without needing to know where that constraint originated.
Prices Replace Control Messages
Traditional smart grid architectures often require large numbers of explicit control messages.
Examples include:
- start charging,
- stop charging,
- reduce export,
- disconnect load,
- increase flexibility.
FP-AMM reduces this communication burden.
Instead of transmitting detailed instructions, holons primarily communicate prices.
Devices then optimise their own behaviour using these economic signals.
Control becomes distributed rather than centralised.
Information Compression
Constraint propagation provides an important computational advantage.
The complete operating state of a feeder may consist of thousands of measurements:
- voltages,
- currents,
- transformer loading,
- switch positions,
- renewable forecasts,
- battery states,
- demand forecasts.
Rather than transmitting all of this information upwards through the hierarchy, the feeder compresses its operating condition into a scarcity price.
This price becomes a compact summary of the current operating state.
Higher levels therefore coordinate using economic information rather than raw engineering data.
Scalability
Because every holon communicates only with its immediate neighbours, communication grows approximately with the size of the hierarchy rather than with the number of individual devices.
Each household coordinates only its own devices.
Each feeder coordinates only its connected households.
Each primary substation coordinates only its feeders.
This allows millions of distributed energy resources to coordinate without requiring every participant to communicate directly with a central market.
The architecture therefore scales naturally as electricity systems become increasingly decentralised.
Constraint Propagation as Distributed Control
Constraint propagation transforms the electricity market into a distributed control system.
Each holon continuously:
- estimates its local operating state,
- evaluates resource scarcity,
- computes a local price,
- communicates that price to neighbouring holons.
Scarcity therefore moves through the electricity system as an economic signal rather than as a sequence of explicit operating instructions.
Participants remain autonomous, yet collectively respond to the physical limitations of the network.
Coordinating Millions of Independent Decisions
The defining feature of FP-AMM is that no participant requires complete knowledge of the electricity system.
Each holon requires visibility only of the resources beneath it.
Each participant observes only the prices relevant to its own transactions.
Local constraints naturally influence local behaviour, while wider system conditions propagate through the hierarchy as prices.
The result is a market architecture in which millions of independent decisions become coordinated through a continuous exchange of economic signals, allowing the electricity system to remain physically feasible without relying on a single centralised optimiser.