Last month, I had the opportunity to participate in an awesome panel at the Type I Summit hosted by @MaxAWebster and @PresidioBitcoin The premise for our discussion was simple: if you were to rip up our existing electricity network and rebuild it from first principles, what would its end state look like? I believe any new, Platonic Form must escape two flaws of institutional design currently plaguing our grids: interconnection is procedural, and return on capex is fixed The solution is to let the spirit of Hayek flow through us: unshackle the rate base for private capital and create a market for grid headroom to monetize network expansion Here's how I think this could work and why it is valuable...

With the introduction of this financial asset and an open, risk-seeking rate base, the incentives of everyone involved in this market for transmission capacity work together to maximize utilization of each node on the grid and direct private capital to the most lucrative places to increase headroom The queue would transform into a market of bids and asks on interconnection costs for both load and gen Whenever an entity considers developing an upgrade, they’d be responsible for auctioning off the transmission capacity (i.e. curtailment stack slots) and originating the right set of initial contracts with an entire market of load serving entities, large loads, and generators This would bypass the onerous need for firm delivery requirements and extensive network reliability modeling by enabling loads and gens to take curtailment risk at specific nodes And it would bypass the rate-setting process by passing through delivery costs as a commodity that all wholesale market participants must purchase if they want their electricity sold or delivered anywhere