Why Electricity Markets Need to Evolve for Renewables

by Dan Roscoe, CEO of Roswall

Building more clean generation is essential. Building a market that can use it efficiently is the next task.

On a windy afternoon, a power system can have more cheap renewable electricity than it knows what to do with. Four hours later the wind drops off, everyone returns home, electricity consumption ramps up, and the same system is straining. Wholesale market prices can travel from near zero to expensive inside a single day.

Some see this phenomenon and conclude renewables don't work. But what it really tells you is that generation has changed faster than the rules built to coordinate it.

We spend most of our attention on how much clean generation is being built. I've spent my career on that. But perhaps the more relevant question now is whether the market can use what we build.

An electricity market does far more than set a price. Its rules decide which resources run, where projects get built, which technologies attract capital and how reliability gets maintained. They also determine whether a wind farm, a battery or a transmission line can be financed at all.

The market, a term that gets used more than it gets examined, is really the operating system of the grid. When the hardware changes, the operating system has to change with it. A power system can only become as flexible as the incentives around it.

Those rules were written for a very different fleet.

Most electricity systems were designed around large plants scheduled to follow predictable demand. Coal, gas, nuclear and hydro behave differently, but the shared assumption was that you could dial generation up or down as customers used more or less.

Wind and solar break that assumption. Almost all their cost lands before they produce a single megawatt-hour, their fuel is free, their marginal cost is near zero and their output follows the weather. What they generate is worth wildly different amounts depending on when and where it hits the grid.

None of this means the old model was badly built. Rules that made complete sense for that fleet can work against you now, and they shouldn't get a pass just because everyone is used to them.

As more wind and solar come online, a system can produce large volumes of cheap electricity all at once. If demand is low in that hour and there isn't enough transmission, storage or responsive load to absorb it, wholesale prices fall hard and some generation gets curtailed because the grid has nowhere to put it.

Negative wholesale prices don't mean electricity is worthless, and they certainly don't mean anyone gets paid to run their dryer. It simply means supply has outrun the system's ability to use it. In the European Union, negative-price events rose a further 50 per cent in 2024, which ACER attributes to periods of low demand meeting high, inflexible renewable and nuclear supply.

Occasional low prices are useful. They tell storage to charge and give customers a reason to shift consumption. When they become routine, they're telling you the system is short on flexibility.

And flexibility is a bigger idea than most people assume.

A renewable system needs resources that respond across very different timescales. Batteries move electricity between hours. Hydro provides dispatchable power. Industrial operations, buildings and EV fleets can adjust when they draw. Interconnections move power to where it's needed.

So, flexibility isn't really a synonym for storage. It's a system capability, and it can come from generation, transmission, or customers themselves. Which is why market rules need to reward what a resource does for the grid rather than just counting units. Timing, location, speed and dependability now carry as much weight as quantity.

Market design has to solve two problems that pull against each other. In the short run, prices should say honestly when power is abundant, when it's scarce and where the network is constrained. In the long run, nobody finances major infrastructure on the price of electricity in the next hour.

The tension grows as renewables push prices down during exactly the hours they generate most. A wind farm can suppress the market price while eroding the revenue needed to finance the next wind farm.

Long-term contracts, PPAs and competitive procurements close that gap. They give investors certainty and customers more predictable costs, and they sit comfortably alongside short-term markets that reward resources for showing up when the system needs them.

In Atlantic Canada, we have the renewable resource. Whether it becomes an advantage depends on our ability to integrate, trade, contract and productively use the electricity.

Nova Scotia is already moving. The Clean Power Plan includes new wind, battery storage, demand-response pilots and stronger regional connections. A second 345 kV transmission line to New Brunswick is slated for completion by the end of 2028, widening the door for interprovincial trade.

But storage also needs to be understood more broadly than utility-scale batteries. As I discussed recently on Digital Nova Scotia’s All Hands on Tech podcast, Nova Scotia has roughly 500,000 hot-water tanks. With smart controls, those tanks could heat water when wind or solar generation is abundant, then store that energy as heat until it is needed. For the customer, nothing changes. For the grid, existing household equipment becomes a distributed source of flexibility. Combining new renewable generation with storage, software and flexible demand will be essential to making the system work efficiently.

The approved battery projects are flexibility made concrete, designed to charge when wind is high and demand is low, then discharge into higher-demand periods while supporting grid stability.

That line to New Brunswick is worth dwelling on, because it marks the limits of market design. Better prices cannot substitute for wires. No pricing rule fixes a constraint that is physical.

Beyond the wires, there's room for more transparent procurement, real incentives for flexible demand, rate structures that pull consumption toward hours of abundant clean power, and clearer routes for businesses to buy renewable electricity directly.

None of that requires importing someone else's wholesale market intact. Nova Scotia should design around its own resources, industrial ambitions and regional relationships, and do it carefully, because badly written rules distort prices or push risk onto customers. Shielding every project from competition would be its own failure.

Building more capacity remains essential. But moving, storing, valuing and using what those resources produce will matter just as much. The next major clean energy project in this region might not be generation at all. It might be the market that lets the rest of it work together.—

Dan Roscoe is the CEO of Roswall Development, a renewable energy developer, and President of Renewall Energy, a renewable energy provider, both based in Halifax, Nova Scotia. His work is focused on building the infrastructure for a cleaner, smarter energy future across Canada and beyond.