The Electricity Grid as a Holarchy
Overview
The electricity system is naturally hierarchical.
Individual devices connect to households.
Households connect to low-voltage feeders.
Feeders connect to primary substations.
Primary substations connect to transmission networks.
Transmission networks together form the national electricity system.
Each level is a complete system with its own resources, objectives and physical constraints, while simultaneously forming part of a larger system.
This is precisely the definition of a holarchy.
Rather than introducing an artificial market structure, FP-AMM simply recognises and exploits the organisational structure that already exists within modern electricity networks.
Every Level is a Holon
Each level of the electricity system can be viewed as a holon.
A holon is simultaneously:
- an independent system,
- part of a larger system.
For example, a household manages its own devices.
It decides when electric vehicles should charge, when batteries should discharge and when flexible appliances should operate.
From the household's perspective, it is an independent control system.
However, that same household also forms part of a distribution feeder.
The feeder does not care which appliance is operating.
Instead, it observes the aggregate power entering and leaving every household connected to it.
Similarly, the feeder itself becomes one component within a larger primary substation.
This pattern repeats throughout the electricity network.
The Electricity Holarchy
FP-AMM models the electricity system using the following hierarchy.
National Electricity System
│
▼
Transmission Region
│
▼
Grid Supply Point
│
▼
Primary Substation
│
▼
Distribution Feeder
│
▼
Household
│
▼
Individual Devices
Every level represents a holon.
Each holon coordinates the resources beneath it while responding to the constraints imposed by the level above.
Every Holon Solves the Same Problem
One of the defining characteristics of FP-AMM is that every level performs fundamentally the same task.
Each holon receives requests from its children.
Each holon determines whether those requests are physically feasible.
Each holon estimates the scarcity of the resources under its control.
Each holon computes local prices.
Each holon communicates only the information required by neighbouring levels.
Although the physical resources differ between levels, the coordination mechanism remains identical.
The same Automatic Market Maker can therefore operate throughout the hierarchy.
Different Levels Manage Different Resources
While the coordination mechanism remains the same, the scarce resource changes with scale.
For example:
| Holon | Primary Resource |
|---|---|
| National System | Generation adequacy |
| Transmission Region | Transmission capacity |
| Grid Supply Point | Import and export capability |
| Primary Substation | Transformer capacity |
| Distribution Feeder | Feeder loading and voltage |
| Household | Flexible devices and local storage |
Each holon therefore estimates scarcity using information that is relevant to its own operating environment.
A household has no need to monitor national transmission flows.
Similarly, the national system does not require visibility of every individual appliance.
Each level only manages the resources for which it is responsible.
Local Coordination
Consider a residential feeder containing one hundred households.
The feeder does not need to understand the operation of every washing machine, heat pump or electric vehicle individually.
Instead, it only needs to know the aggregate demand presented by those households and the remaining capacity of the feeder.
Similarly, each household only needs to coordinate its own devices.
This decomposition dramatically reduces computational complexity.
Rather than solving one enormous optimisation problem containing millions of devices, the overall coordination task is divided into many smaller problems that can operate independently.
Information Flows Upwards
Each holon aggregates information from the level below.
For example:
- households aggregate device demand,
- feeders aggregate household demand,
- substations aggregate feeder demand,
- transmission regions aggregate substations,
- the national system aggregates transmission regions.
As information moves upwards through the hierarchy, increasing levels of abstraction are created.
Higher levels no longer observe individual devices.
Instead, they coordinate collections of resources.
Decisions Flow Downwards
Coordination occurs in the opposite direction.
Higher levels communicate prices and operating constraints to lower levels.
Each holon then makes decisions within those constraints before communicating with its own children.
For example:
- the national system communicates energy scarcity,
- transmission regions communicate network scarcity,
- feeders communicate local congestion,
- households schedule individual devices.
Each level therefore combines information received from above with knowledge of its own local operating conditions.
A Distributed Market Architecture
FP-AMM therefore replaces a single centralised market with a hierarchy of cooperating markets.
Each holon continuously:
- estimates its local operating state,
- evaluates resource scarcity,
- computes local prices,
- accepts feasible transactions,
- updates its state,
- communicates with neighbouring holons.
The overall electricity market emerges through cooperation between these interacting markets rather than through a single central optimisation.
From Hierarchy to Price Formation
Viewing the electricity system as a holarchy provides more than an elegant organisational structure.
It provides the foundation for distributed price formation.
Every holon continuously estimates the scarcity of the resources under its control.
These local scarcity estimates become local prices.
The challenge then becomes combining prices from multiple levels of the hierarchy into a single price that participants can respond to.
The next section explains how FP-AMM propagates prices through the holarchy and why the most restrictive constraint naturally determines the price observed by market participants.