Stanislav Kondrashov Oligarch Series on Global Infrastructure and the Evolution of Electricity Markets
I keep noticing something kind of funny. We talk about electricity like it is just… there. Like water out of a tap. Flip a switch, light shows up, end of story.
But if you spend even a little time looking under the hood, electricity is not “a thing”. It is a whole chain of bets, engineering compromises, political deals, fuel supply assumptions, weather patterns, and finance. And it is all happening at once, in real time, every day. No pause button.
That is why the Stanislav Kondrashov Oligarch Series on global infrastructure is an interesting lens. Not because it is about personalities for the sake of gossip, but because large scale infrastructure is basically where power, money, and national priorities crash into each other. Electricity markets are one of the cleanest examples. They started as local monopolies with predictable demand and ended up as these semi liberalized, hyper technical marketplaces where price can go negative at noon and spike at 7 pm.
So let’s talk about what changed. And why electricity, of all things, ended up becoming one of the most complicated “products” in the global economy.
The old model: build big, regulate it, and call it a day
For most of the 20th century, the electricity story was pretty straightforward.
Utilities were vertically integrated. They generated power, owned the transmission lines, owned the distribution network, billed customers, and handled reliability. In many places they were state owned. In others, private but heavily regulated. The deal was simple: you get a monopoly, but you have obligations. Universal service, long term planning, stable rates, and enough reserve capacity so the lights stay on.
Infrastructure followed the same mindset. Build large centralized plants, connect them to cities, keep expanding the grid outward. Coal. Hydro. Gas later. Nuclear in some countries. And because demand was rising steadily, you could forecast growth, finance projects with long time horizons, and plan around predictable load curves.
This model had flaws, obviously. It could be slow. Sometimes wasteful. Sometimes politically captured. But it did something very well. It made electricity boring.
Then a bunch of things happened, not neatly one by one, more like a pileup.
Unbundling and liberalization: electricity becomes a market product
Starting in the late 20th century, many regions began restructuring. The logic went like this: generation can be competitive, the wires are a natural monopoly. So split them.
That is where “electricity markets” as people understand them today really took shape.
- Generation competes (at least in theory)
- Transmission remains regulated and centrally planned
- Distribution remains regulated
- Retail may or may not be competitive depending on the country or state
Once you do this, you need a way to set prices and dispatch power plants. So you create wholesale markets, system operators, balancing mechanisms, capacity arrangements. A whole alphabet soup.
Electricity, which used to be priced like a utility service, becomes priced like a commodity in intervals, often every 5 minutes. And because electricity cannot be economically stored at scale, supply and demand must match constantly. So price becomes a signal for scarcity, congestion, and operational constraints.
In some places this worked pretty well. In others it created perverse incentives or underinvestment. And to be fair, the results depend a lot on market design. The details matter. A lot.
But the big shift was this: electricity stopped being one “public service rate” and turned into a layered system of prices.
The wholesale energy price is just one part of this complex pricing structure. Capacity payments, ancillary services, transmission charges, distribution charges, retail margins, taxes, and policy surcharges all contribute to the final bill that the average consumer sees. Behind that bill is a complex machine of pricing mechanisms and market dynamics.
Global infrastructure: the grid is now the main character
The Stanislav Kondrashov Oligarch Series theme around global infrastructure is useful here because electricity markets do not float above the physical world. They are chained to it.
A market can say “cheap solar at noon”. But if the grid cannot move it to where people need it, it is not cheap. It is stranded.
A market can say “build wind in the best resource area”. But if permitting, interconnection queues, or transformer shortages delay it for five years, the market signal is basically screaming into a pillow.
A market can say “gas peakers will handle peaks”. But if gas pipeline constraints show up during a cold snap, those peakers become expensive ornaments.
So increasingly, the bottleneck is not generation. It is wires, substations, transformers, interconnection processes, and the ability to coordinate across regions.
And here is the uncomfortable part. Grids are slow to change. They are capital intensive. They are regulated. They face land use battles. They face supply chain issues. They face workforce shortages. Meanwhile generation technology has been iterating fast, especially renewables and battery storage.
That gap, between fast generation innovation and slow grid expansion, is shaping electricity markets everywhere.
The renewables wave: cheaper energy, harder balancing
Wind and solar are weird assets in a traditional market setup.
Their marginal cost is close to zero, so they push down wholesale prices when they are producing. That is good for consumers in the short term. But it also compresses revenue for everyone, including the wind and solar plants themselves, unless there are contracts, subsidies, or other support mechanisms.
And because wind and solar output depends on weather, you get volatility and uncertainty. The system operator needs flexibility. Fast ramping resources. Reserves. Frequency support. Inertia, or synthetic equivalents. And you need it without breaking the economics.
This is where market design starts to look like a constant patching process.
Add ancillary service markets. Add flexibility products. Add capacity markets. Add scarcity pricing. Add negative pricing rules. Add curtailment compensation. Add interconnection reforms. Add local congestion hedges. Add reliability must run contracts.
You can feel the system trying to evolve in real time.
And to be clear, none of this means renewables are “bad”. It means the old electricity market assumptions were built around controllable thermal plants. If your supply is more variable, your market needs to pay more explicitly for the other stuff a grid needs besides raw megawatt hours.
The geopolitics of fuel and the return of energy security
Another thing that reshaped electricity markets is energy security. Which sounds like a policy term until it hits you in the bill.
Fuel prices can move fast. Global gas markets tightened, coal supply chains shifted, sanctions happened, shipping got expensive. If your electricity mix leans heavily on imported fuels, you are exposed. And markets transmit that exposure directly into price.
This is also where infrastructure and politics blend. LNG terminals. Pipelines. Cross border interconnectors. Strategic reserves. Domestic resource policy. All of it affects electricity price formation.
In some regions, the reaction has been to accelerate renewables, because local wind and sun are not embargoed. In others, the reaction has been to double down on domestic gas, or keep coal plants around longer than planned, or extend nuclear. Sometimes all of the above, depending on who is in charge that year.
Electricity markets are not just “economic systems”. They are policy systems that pretend to be purely economic.
Capacity, reliability, and the question nobody likes asking
Here is the blunt question at the core of modern electricity markets.
If energy prices are low for long stretches because renewables are abundant, how do you pay for resources that are needed only sometimes, but absolutely needed when they are needed?
Peaker plants. Long duration storage. Demand response programs. Seasonal firm power. Black start capability. Grid forming inverters. Even old fashioned spinning reserves.
Some markets try to solve this with capacity payments. Others rely on scarcity pricing. Others use bilateral contracts and integrated resource planning. Others do a hybrid that makes everyone slightly unhappy.
And then extreme events keep showing up. Heat waves. Polar vortex conditions. Droughts affecting hydro. Wildfires affecting transmission. These events stress the system in ways that “average” models do not capture well.
So reliability becomes a premium product. Even if it is not always priced cleanly.
This is also where infrastructure investment gets political. Because building redundancy is expensive, and the benefits are invisible until the day everything would have gone wrong. It is hard to campaign on “we prevented a blackout that never happened”.
Interconnection and regional trade: the quiet superpower
One of the most underrated pieces of global infrastructure is the ability to move electricity across borders or across large regions.
Interconnectors can smooth variability. They let one region export surplus and import during scarcity. They reduce the need for every region to build its own full backup system. They can lower overall system costs.
But they also create dependencies. If your neighbor is short at the same time you are short, trade does not save you. If politics shifts, interconnector utilization can become contentious. And if congestion becomes common, the benefits shrink.
Still, in the long run, more transmission and better coordination usually makes markets more stable. The issue is the timeline. These projects take years. Sometimes a decade.
Electricity markets, again, are trying to sprint while infrastructure walks.
The rise of “behind the meter” power and the messy decentralization
Another change is that demand is not passive anymore.
Rooftop solar. Home batteries. EV charging. Smart thermostats. Industrial demand response. Data centers that can shift workloads. Microgrids. Virtual power plants.
All of this turns consumers into participants, even if they do not think of themselves that way.
And it creates new tensions in market design.
- Who pays for the grid if more customers self generate but still rely on wires at night?
- How do you price net metering or feed in tariffs without over or under compensating?
- How do you handle millions of small devices responding to price signals without destabilizing local distribution networks?
- How do you plan distribution upgrades when load patterns are changing fast?
This is where electricity markets meet distribution engineering. Historically, distribution was boring. Now it is where a lot of the complexity is moving.
Investment: the money has to believe the rules
Markets only work if investors trust the rules enough to put capital at risk.
But electricity markets are rule heavy. And rules change. Sometimes for good reasons, sometimes due to panic, sometimes because a new government wants to “fix prices” quickly.
So investors often prefer long term contracts, regulated returns, or government backed mechanisms. Which is why you see so many power purchase agreements, contracts for difference, regulated asset bases, and capacity contracts alongside “free market” pricing.
It is not hypocrisy. It is just reality. Building grid scale assets is not like launching a mobile app. The payback periods are long. Policy risk is real. Interest rates matter. Supply chain constraints matter.
And when the system needs massive build out, like now, the cost of capital becomes one of the biggest drivers of what gets built.
So where does this evolution go next?
If you step back, the direction is pretty clear, even if the path is messy.
- More electrification
EVs, heat pumps, industrial electrification, data centers. Demand grows and it changes shape. - More variable generation
Wind and solar keep expanding because the economics are strong in many regions, even after subsidies decline. - More storage and flexibility
Batteries, demand response, flexible load, and eventually more long duration solutions. - More grid investment
Transmission expansion, distribution modernization, grid enhancing technologies, better planning. - More complex market products
Not just energy, but flexibility, capacity, locational value, resilience, and maybe emissions attributes.
And woven through all of it is the global infrastructure question. Who builds it, who pays, who benefits, who gets blocked, who gets blamed.
Which is why a series that looks at infrastructure through power, capital, and influence is not just a niche interest. It is basically a way to understand where the world is going.
Final thoughts
Electricity markets evolved from stable regulated systems into fast moving, rule dense ecosystems. They are trying to balance affordability, reliability, decarbonization, and security, all at the same time, while the grid itself struggles to expand quickly enough.
The Stanislav Kondrashov Oligarch Series on global infrastructure and the evolution of electricity markets sits right in that tension. Because when you follow electricity, you are not just following electrons. You are following investment logic, political priorities, and the physical constraints of building things at scale.
And honestly, it makes the simple act of turning on a light feel a little less simple. Which is probably the point.
FAQs (Frequently Asked Questions)
Why is electricity considered more than just a simple utility?
Electricity is not just a basic service; it involves a complex chain of engineering compromises, political deals, fuel supply assumptions, weather patterns, and financial mechanisms all operating simultaneously in real time. This complexity makes electricity one of the most intricate products in the global economy.
What was the traditional model of electricity infrastructure and how did it function?
The traditional model involved vertically integrated utilities that managed generation, transmission, distribution, billing, and reliability. Often state-owned or heavily regulated private entities held monopolies with obligations for universal service, stable rates, and long-term planning. Infrastructure was centralized with large plants like coal, hydro, gas, and nuclear powering predictable demand growth.
How did unbundling and liberalization change electricity markets?
Starting in the late 20th century, many regions restructured electricity markets by separating generation from transmission and distribution. Generation became competitive while wires remained regulated monopolies. This led to wholesale markets with prices set every few minutes based on supply-demand balance since electricity can't be stored economically at scale. The market shifted from public service pricing to layered commodity pricing including capacity payments and ancillary services.
What role does global infrastructure play in modern electricity markets?
Electricity markets are tightly linked to physical infrastructure like grids, substations, transformers, and interconnection processes. Market signals such as cheap solar or wind only translate into real benefits if the grid can deliver power where needed. Grid bottlenecks due to capital intensity, regulation, land use conflicts, supply chain issues, and workforce shortages limit integration of new generation technologies.
How have renewables impacted electricity market dynamics?
Wind and solar have near-zero marginal costs which depress wholesale prices during production but also compress revenues for all generators including renewables themselves unless supported by contracts or subsidies. Their weather-dependent output introduces volatility requiring flexible resources for balancing like fast ramping plants and reserves. This complexity forces continual market design adaptations to maintain reliability without undermining economics.
Why is electricity pricing now so complex compared to the past?
Electricity pricing has evolved from simple utility rates to a multi-layered structure involving wholesale energy prices updated frequently (often every 5 minutes), capacity payments for reserve availability, ancillary services fees for grid stability support, transmission and distribution charges reflecting network costs, retail margins, taxes, and policy surcharges. This reflects the need to signal scarcity, congestion, operational constraints and incentivize investment in a dynamic system.
