If we’re building an energy banking system, we should learn from the history of actual banking – including its spectacular failures. Financial innovation creates new capabilities and new risks in roughly equal measure. The energy transition will be no different.
Could we see energy “bank runs”? In a financial bank run, depositors rush to withdraw funds simultaneously, overwhelming the bank’s reserves. The energy equivalent: a grid stress event that causes thousands of home battery owners to switch to backup mode simultaneously, withdrawing their capacity from virtual power plants precisely when it’s needed most.
It nearly happened during Australia’s 2022 energy crisis, when high prices and supply shortages led some batteries to prioritize self-consumption over grid services. If everyone defects from the collective at once, the collective fails. Virtual power plant operators are developing contractual and technical safeguards, but the risk is real.
A worse scenario: a major aggregator going bankrupt, leaving the grid suddenly short of capacity it was counting on. When flexibility is outsourced to intermediaries, you inherit their counterparty risk.
Reserve requirements may become necessary. Banks are required to maintain minimum reserves precisely because the system depends on them honoring obligations they can’t always predict. Should virtual power plants face similar requirements? Should aggregators maintain backup capacity for when their distributed fleet underperforms?
These questions are just beginning to be asked. Australia’s AEMO is developing frameworks for how much distributed capacity can be relied upon during extreme events. The answers will shape how much the system can depend on distributed storage versus traditional generation.
Cybersecurity becomes existential. A traditional power plant can be physically secured. A grid that relies on millions of distributed, internet-connected devices coordinating in real-time presents a fundamentally different challenge.
A compromised aggregator platform could destabilize the grid far more effectively than any physical attack on a power station. Imagine malware that simultaneously commands thousands of batteries to discharge, or a ransomware attack on a virtual power plant operator during a heat wave. The attack surface expands with every connected device.
The UK’s National Cyber Security Centre has flagged smart energy devices as a growing risk. Australia’s AEMO is developing cybersecurity standards for distributed resources. The security architectures that made sense for isolated utility control systems aren’t sufficient for a networked energy marketplace.
Speculation and market manipulation are possible. When electricity becomes a tradeable asset with storage, derivatives, and financial intermediaries, the conditions exist for the same speculative dynamics that affect other commodity markets.
The 2022 European energy crisis showed how quickly prices can become disconnected from underlying fundamentals when markets panic. Australia’s wholesale market has seen episodes of strategic bidding that critics call manipulation. Adding more financial instruments creates more opportunities for both legitimate arbitrage and gaming the system.
Regulators understand commodity market manipulation, but they’re used to markets with tangible inventories. The energy banking system will need surveillance and enforcement mechanisms adapted to its unique characteristics – real-time transactions, distributed assets, algorithmic trading.
Equity concerns are profound. Who gets to participate in energy banking? Home batteries cost thousands of dollars. Rooftop solar requires home ownership or at least a suitable roof. V2G demands a new EV with bidirectional charging capability and the right kind of charger.
If the benefits of the new energy economy – reduced bills, arbitrage income, resilience during outages – flow primarily to affluent homeowners while the costs of grid maintenance are socialized across all ratepayers, we’re recreating familiar patterns of financial exclusion. The energy-poor subsidizing the energy-rich.
It’s already visible in some markets. In Australia, households with solar and batteries pay far less than those without, yet everyone pays for the grid infrastructure that makes the whole system work. Germany’s feed-in tariffs successfully built out renewables but transferred billions from non-solar households to solar owners.
The parallel to financial services cuts both ways. Banking enabled middle-class prosperity, but it also enabled predatory lending, payday loans, and financial exclusion. Will there be energy payday lenders? Predatory solar leases? Communities where everyone has home batteries and communities where no one does?
Community battery programs – like those being piloted in Victoria and South Australia – offer one model for shared access to storage. Community solar lets renters participate in generation. But the default trajectory, without active policy intervention, is toward stratification.
The technology will outrun the governance. This is perhaps the deepest lesson from financial history. Innovation moves faster than regulation. By the time rules catch up, the landscape has shifted again.
We’re deploying batteries, building virtual power plants, and enabling peer-to-peer trading faster than regulatory frameworks can adapt. That’s partly good – innovation shouldn’t wait for permission. But it means risks will materialize before safeguards exist. The 2008 financial crisis happened in part because derivatives proliferated faster than anyone understood their systemic implications.The energy transition won’t cause a financial crisis. But it might cause grid crises, market failures, or equity disasters that we’ll look back on and wonder why we didn’t see coming. Getting governance right – not eventually, but in parallel with the technology – matters enormously.
