Energy, Society & Market Design in the Digital Era

Module 1 · 4 lessons

Energy and civilisation

Energy is the foundation of civilisation. This module explores how access to energy shaped human progress, industrialisation and modern living, and introduces the core distinction between energy, power and electricity-system reliability.

Module 2 · 7 lessons

How electricity systems physically work

Electricity is often discussed as though it were an ordinary commodity that can be bought, sold and delivered in much the same way as food, fuel or manufactured goods. It cannot. Electricity is part of a continuously operating physical system. It must be produced, transported and consumed through an interconnected network that is governed by electrical laws and strict engineering limits. This module introduced the essential physics needed to understand why electricity systems require a very different form of coordination from ordinary markets.

Module 3 · 7 lessons

Reliability and Security of Supply

Electricity systems must do more than produce enough energy over the course of a day, month or year. They must also be capable of meeting demand at the precise times and locations where electricity is required, while remaining secure when generators fail, forecasts are wrong or network conditions change. This is the difference between energy adequacy and system reliability. A generator may produce large quantities of electricity but contribute relatively little during periods of scarcity. Another resource may generate less energy overall yet provide essential capacity, reserves, flexibility or restoration services when the system is under stress. The central lesson of this module is therefore: The value of an electricity resource cannot be measured by energy production alone. Different resources contribute different forms of system value.

Module 4 · 9 lessons

Technologies in the electricity system

Electricity systems are built from a diverse range of technologies, each with different strengths, weaknesses and contributions to system reliability. Some technologies produce large quantities of low-cost energy. Others provide dependable capacity during periods of peak demand. Some respond within milliseconds to disturbances, while others offer long-duration storage or support the transmission network. Increasingly, consumers themselves are becoming active participants through flexible demand and distributed energy resources. The central lesson of this module is that there is no such thing as a universally "best" generation technology. Instead, every technology contributes a different combination of system services, including energy, capacity, flexibility, reserves, inertia, location and restoration capability. Throughout this module we examine how conventional thermal generation, nuclear, renewable energy, storage, interconnectors and demand-side resources operate, before comparing them as components of an integrated electricity system. The module concludes by challenging one of the most common misconceptions in energy policy: that technologies can be compared simply using their cost per megawatt-hour (£/MWh). While this metric measures the cost of producing energy, it says little about when that energy is available, where it is delivered, how reliably it can be supplied, or what additional services the technology provides. Understanding the true strengths and limitations of different technologies is essential for designing electricity systems that are not only affordable and sustainable, but also secure and reliable.

Module 5 · 9 lessons

How Electricity Markets Developed

Electricity markets did not emerge overnight. They are the product of decades of technological change, economic theory and public policy. In this module, we trace the evolution of electricity systems from the vertically integrated utilities that dominated much of the twentieth century to today's liberalised electricity markets. We examine why governments restructured the electricity industry, how competition was introduced into generation and retail supply, and why many parts of the electricity system remain natural monopolies requiring regulation. Along the way, you will learn how wholesale electricity markets operate, the role of bilateral contracts and power exchanges, how electricity is traded across day-ahead, intraday and balancing markets, and how consumers purchase electricity through retail suppliers. We also explore why governments introduced capacity mechanisms and other support schemes to encourage investment and maintain security of supply. By the end of this module, you will understand not only how modern electricity markets work, but also why they were designed this way, the problems they were intended to solve, and the challenges they continue to face as electricity systems become increasingly decentralised, digital and low-carbon. Most importantly, this module provides the historical context needed for the remainder of the course. Before we can critically evaluate today's market arrangements—or design better ones—we must first understand how and why they came into existence.

Module 6 · 8 lessons

Marginal Pricing and Economic Dispatch

Electricity markets around the world are largely built upon one central economic idea: marginal pricing. For more than three decades, this principle has shaped how electricity is dispatched, how prices are determined and how generators are paid in many liberalised electricity systems. This module explains the economic foundations of marginal pricing from first principles. We begin by exploring merit-order dispatch, marginal cost and uniform pricing before examining concepts such as scarcity pricing, producer and consumer surplus, and the effects of transmission congestion. Along the way, we explain why marginal pricing became the dominant market design and the important role it has played in improving the short-run efficiency of electricity markets. Having established these foundations, we then examine the assumptions on which the textbook model relies and consider where those assumptions become increasingly difficult to satisfy in modern electricity systems characterised by large amounts of renewable generation, storage, distributed energy resources and active consumers. By the end of this module, students will understand both the strengths and the limitations of marginal pricing, providing the foundation for critically evaluating existing electricity market designs and exploring alternative approaches in later modules.

Module 7 · 8 lessons

The Changing Electricity System

The electricity system is undergoing the most significant transformation since the creation of the national grid. Traditional power systems were built around large, centrally dispatched generators supplying passive consumers through one-way electricity networks. Today's system is fundamentally different. Renewable generation, distributed energy resources, electrified transport and heating, battery storage and smart devices are reshaping how electricity is produced, transported and consumed. This module explores the technological and operational changes driving this transition. We examine the growth of variable renewable generation, the electrification of heat and transport, the emergence of prosumers and bidirectional power flows, and the rapid increase in the number of controllable devices connected to the grid. We also introduce the challenges of limited observability within low-voltage networks and the growing importance of digital infrastructure and smart grids. Finally, we consider why many existing electricity market architectures are finding it increasingly difficult to coordinate these more complex, decentralised systems. Rather than suggesting that traditional market designs were fundamentally flawed, we show how they were developed for a very different type of electricity system. Understanding this changing landscape provides the foundation for the remaining modules, where we explore new approaches to coordinating increasingly digital, distributed and cyber-physical electricity networks.

Module 8 · 8 lessons

A Control-Theoretic Perspective on Electricity Markets

Traditional electricity markets are often introduced through economics, focusing on prices, incentives and efficient resource allocation. An alternative perspective comes from control theory, which studies how dynamic systems are observed, coordinated and regulated over time. In this module we explore how concepts such as feedback, state estimation, observability and control can be applied to electricity markets. Rather than viewing markets solely as financial institutions, we consider how they influence the physical behaviour of electricity systems and examine the similarities between market mechanisms and engineering control systems. The objective is not to argue for a particular market design, but to provide an additional conceptual framework that helps explain why different market architectures may perform differently as electricity systems become increasingly distributed and dynamic.

Module 9 · 8 lessons

Fairness in Electricity Systems

Every electricity system must make decisions about how costs, benefits and risks are shared between participants. These decisions are often described in terms of fairness, yet fairness is not a single universally agreed concept. Different people may reasonably disagree about what constitutes a fair outcome depending on the objectives being pursued and the values being prioritised. For example, should everyone pay the same price for electricity, or should costs reflect the extent to which participants use or place demands on the network? Should vulnerable consumers receive additional protection? How should limited electricity be allocated during periods of scarcity? How can today's investment decisions balance the needs of current consumers with those of future generations? This module introduces the major concepts of fairness that arise in electricity systems and explores how different approaches can lead to different policy and market design choices. Students will examine ideas such as equality, equity, cost causation, differentiated reliability, energy vulnerability and fairness across time and geography. Rather than advocating a particular definition of fairness, the module presents fairness as an important design consideration that must be balanced alongside other objectives such as efficiency, affordability, reliability and sustainability. By the end of the module, students will understand that fairness is not simply an ethical question but also an engineering and economic design challenge, influencing how modern electricity systems allocate resources, recover costs and respond to changing conditions.

Module 10 · 10 lessons

A New Approach to Market Design

Throughout this course, we have examined how electricity markets have evolved, how they operate today, and the engineering and economic principles that underpin their design. We have also explored many of the challenges facing modern electricity systems, including increasing decentralisation, variable renewable generation, distributed energy resources, network constraints, fairness, investment incentives and the growing importance of digital coordination. This module introduces one possible framework for addressing these challenges. Drawing on recent research in electricity market design and cyber-physical systems, the module presents a stateful, continuously clearing market architecture that seeks to coordinate energy, network capacity and reliability within a single integrated allocation process. Rather than viewing electricity markets as a collection of separate mechanisms operating on different timescales, the framework considers how pricing, scheduling and physical feasibility can be coordinated through a unified decision-making process that continuously adapts to changing system conditions. Students will examine concepts including stateful allocation, continuous clearing, network-feasible scheduling, distributed and hierarchical pricing, fairness over time, flexible demand, differentiated electricity products and long-term investment signals. The module concludes by considering how the ideas developed for electricity systems may also apply to other cyber-physical resource networks. The purpose of this module is not to suggest that there is a single correct future market design. Instead, it demonstrates how engineering, economics and computer science can be combined to develop and evaluate alternative market architectures capable of supporting increasingly complex electricity systems.

Module 11 · 8 lessons

Institutions, Regulation and Governance

Electricity systems do not operate through engineering and markets alone. They also depend upon the institutions responsible for planning, operating, regulating and overseeing the sector. Governments establish policy objectives. Regulators develop and enforce market rules. System operators coordinate the real-time operation of the network. Transmission and distribution companies build and maintain infrastructure. Market participants invest in new technologies and deliver services to consumers. As electricity systems become increasingly decentralised, digital and interconnected, the responsibilities of these organisations are becoming more complex. New technologies, changing consumer behaviour and evolving policy objectives are placing growing demands on institutional arrangements that were often developed for very different electricity systems. This module examines how institutions shape the operation and evolution of electricity systems. Students will explore the respective roles of governments, regulators, system operators and network companies, before considering broader questions of governance, accountability and organisational design. The module also examines different approaches to regulation, including rules-based and principles-based frameworks, and considers how regulatory incentives influence innovation, competition and long-term infrastructure development. The module concludes by examining how institutions themselves may need to evolve to govern increasingly distributed electricity systems, where millions of consumers, devices and market participants interact continuously across multiple levels of the network. By the end of this module, students will understand that successful electricity systems depend not only on sound engineering and well-designed markets, but also on effective institutions capable of aligning incentives, enabling innovation and delivering long-term public value.

Module 12 · 9 lessons

Designing the Energy System of the Future

The electricity sector is undergoing one of the most significant transformations in its history. Electrification, digital technologies, distributed energy resources and changing consumer expectations are reshaping how electricity systems are planned, operated and governed. At the same time, governments around the world face important decisions about market design, infrastructure investment, ownership models and the role of consumers within increasingly complex energy systems. This final module brings together the engineering, economic and institutional concepts explored throughout the course to consider how future electricity systems might be designed. Rather than presenting a single blueprint, the module encourages students to evaluate the trade-offs associated with different approaches to planning, markets, regulation and governance. Students will examine questions such as the respective roles of public and private investment, the importance of digital public infrastructure, the opportunities created by automation and consumer participation, and the relationship between energy policy and democratic legitimacy. The module concludes with a systems-level design exercise in which students apply the knowledge developed throughout the course to develop and justify their own vision for the future electricity system. In doing so, students are encouraged to balance engineering feasibility, economic efficiency, institutional effectiveness and broader societal objectives. By the end of this module, students will appreciate that designing future energy systems is not solely an engineering or economic challenge. It requires integrating technology, markets, institutions and public policy into coherent systems capable of delivering secure, affordable, sustainable and resilient electricity for future generations.