In energy trading, megawatts (MW) themselves while equal, are not considered fungible. Fungibility refers to the “interchangeability of goods or assets, where individual units can be mutually substituted with no difference in value or function”. So while the unit of measurement (MW) is standard, the actual energy being traded is not fungible due to the various factors that influence its value and usability.

This presents an opportunity to Swarm because the critical function of a VPP is mitigating stress on grid infrastructure and reducing the likelihood of power outages during peak demand periods. A VPP can therefore alter the demand characteristics and regionality of energy trading.

In the context of energy, these are the main factors which affect supply and demand.

Specificity of Energy Sources: Energy, while measured in megawatts, comes from various sources (like coal, natural gas, hydro, solar, and wind), each with different characteristics, costs, and impacts. For example, while a megawatt-hour (MWh) of solar energy is directly interchangeable with a MWh of coal energy, that’s where the similarity ends. The differences in generation cost, environmental impact, and availability vary wildly.

Marginal impact To “add” a MW of coal energy to the Grid which is unscheduled, for example, would cost a bewildering amount. To “add” a MWH of solar energy might be as simple as diverting it from the batteries of as few as 150 homes, located close to a position of need.

Timing and Location: 

The value of a megawatt of power can vary significantly depending on the time of day and the location. Energy prices fluctuate based on demand, which is higher during peak hours. Similarly, energy in one location cannot be directly exchanged for energy in another due to transmission constraints and losses. It can be transmitted over long distances, if losses are taken into account in the transfer.

Energy Contracts and Derivatives: 

In energy trading, contracts are based on the delivery of a certain amount of energy (measured in MWh) over a specified period. These contracts can be specific to the type of energy, the location of delivery, and the time of delivery, making them not directly interchangeable.

Regulatory and Market Differences: 

Different energy markets have varying regulations and structures, which can affect how energy is traded and valued. This adds another layer of complexity that prevents direct interchangeability, particularly internationally.