Most electricity markets are highly regulated markets, and the regulations are enforced. You are "free" to trade if you follow the rules.
Read some of the PDFs for http://www.google.com/search?q=electricity+market+design
and you can see some of the issues and some of the suggested solutions. Market rules are designed to create a functioning market - like a system architecture - to achieve network reliability, price stability, reduce political interference, and prevent gaming the system (Enron, but gaming can happen anywhere in the system).
Physical electricity connections for consumers are often natural monopolies, and thus require regulation. Imagine you could only buy power from an unregulated AT&T and that there was only one AT&T :-)
It is a very specialised job to design the rules and enforcement systems for a market so that the players (independent suppliers, consumers, and network operators) have the correct incentives to acheive systematic goals.
When the regulations fail, you get Enron and Southern California. When the market rules are not designed correctly, Iraq consumers have blackouts even though their next door neighbour has power to spare, because there is no incentive to build or run a transmission connection between them (e.g. due to fuel subsidies, or political instability). When contracts or the free-market fails, they cause Germany to dump excess wind turbine power to a buyer in another country, but they overload the network of a third party country stuck in-between the generator and load. Regulations are set up to help prevent the whole US eastern seaboard blacking out due to domino effects of network failures and individual incentives of the players to avoid costly redundancy or over-capacity.
99.9xx Reliability costs huge money, and rules help incetivise players to be capable of handling black swan events. Most consumers care about reliability, but most are too small to have any purchase power to effectively influence power producers/network operators (networks have monopolies on connections to consumers, only a very limited number of huge consumers have independent connections).
Deeply hard problems: political, economic, and technical.
700 million people blackout! Long article, but not very technical, contains some excellent quotes and sound like free anarchy at individual, corporate and government levels - corruption, politics, theft, fraud, overload, fatalaties.
I liked this quote: "No one is taking care of the grid — the network of transmission lines, interconnectors and transformers that is essential to life as we know it; two, supply cannot keep up with demand; and three, rate-setting is a political rather than an economic process. It should not come as a shock, so to speak, that neglect, failure to prepare and playing politics with essentials should lead to disaster ... No less than the American Society of Civil Engineers said in a report released in April that the [US] grid could break down by 2020 unless investment in it is increased immediately by about one billion dollars a year. Why so much? Because, according to the report, more than two-thirds of the system’s transmission lines and power transformers are at least 25 years old, and 60 percent of the circuit breakers have been in use for more than 30 years."
Here are some of my favorite quotes:
..."At 13:30 EDT, the MISO EMS engineer went to lunch. However, he forgot to re-engage the automatic periodic trigger."
..."Also at 15:42 EDT, the Perry plant operator called back with more evidence of problems. “I’m still getting a lot of voltage spikes and swings on the generator . . . . I don’t know how much longer
we’re going to survive.”
..."At 15:46 EDT the Perry plant operator called the FE control room a third time to say that the unit was close to tripping off: “It’s not looking good . . . .We ain’t going to be here much longer and you’re
going to have a bigger problem.”
A great read both for its tutorial and historical value.
Most electricity markets are highly regulated markets, and the regulations are enforced. You are "free" to trade if you follow the rules.
Read some of the PDFs for http://www.google.com/search?q=electricity+market+design and you can see some of the issues and some of the suggested solutions. Market rules are designed to create a functioning market - like a system architecture - to achieve network reliability, price stability, reduce political interference, and prevent gaming the system (Enron, but gaming can happen anywhere in the system).
Physical electricity connections for consumers are often natural monopolies, and thus require regulation. Imagine you could only buy power from an unregulated AT&T and that there was only one AT&T :-)
It is a very specialised job to design the rules and enforcement systems for a market so that the players (independent suppliers, consumers, and network operators) have the correct incentives to acheive systematic goals.
When the regulations fail, you get Enron and Southern California. When the market rules are not designed correctly, Iraq consumers have blackouts even though their next door neighbour has power to spare, because there is no incentive to build or run a transmission connection between them (e.g. due to fuel subsidies, or political instability). When contracts or the free-market fails, they cause Germany to dump excess wind turbine power to a buyer in another country, but they overload the network of a third party country stuck in-between the generator and load. Regulations are set up to help prevent the whole US eastern seaboard blacking out due to domino effects of network failures and individual incentives of the players to avoid costly redundancy or over-capacity.
99.9xx Reliability costs huge money, and rules help incetivise players to be capable of handling black swan events. Most consumers care about reliability, but most are too small to have any purchase power to effectively influence power producers/network operators (networks have monopolies on connections to consumers, only a very limited number of huge consumers have independent connections).
Deeply hard problems: political, economic, and technical.