Transforming marginal-cost pricing: A blockchain approach to fundamental energy system dynamics

Marginal-cost pricing (MCP) is widely employed in modern energy systems . The model was criticised during the 2022 energy crisis in Europe. Alternative market designs aim to overcome MCP limitations amid cheaper renewable energy and electricity costs. This paper identifies counterproposals that overlook MCP's rationale and outlines five fundamental principles for energy systems: demand-supply balancing, efficient resource allocation , reliability and security, transparency and fair competition, and affordability . Finally, it explores blockchain's potential to enable dynamic, decentralised energy markets by improving efficiency, enhancing grid reliability, increasing transparency, reducing manipulation, and providing flexibility for modern energy systems. • Merit-order pricing was questioned during the 2022 energy crisis, as electricity costs soared despite cheaper renewables. • Marginal pricing criticised for failing to integrate renewables and pass on cost savings to consumers. • Alternative pricing models protecting renewables from market forces may create inefficiencies and supply-demand mismatches. • Energy systems must meet balancing, efficiency, security, transparency, fair competition, and affordability criteria. • Blockchain enhances energy markets through improved transparency, participation, competition, flexibility, and efficiency