When you think of electricity, you probably think of the power you use and how it gets to your home: the wires leading to your house or apartment building, the wooden or concrete poles supporting them, the transmission towers along the road. Maybe you think about your electric company, and you very probably think of your bill. For most of us, a steady, uninterrupted supply of electricity is a given: we expect the lights to come on when we flip the switch and our refrigerators to keep humming along.
But on the other end of those electric wires connecting to your house lies a complex network of energy wholesalers, retailers, and distribution companies managed by electric system operators whose responsibility is to reliably balance supply and demand. In the industry, this complex system is known as the electric wholesale market. When you experience an outage at your home or office, the source of that energy loss very likely rests with this energy wholesale market. The electric system operator manages the risks and responsibilities of keeping the energy flowing, and in order to deliver uninterrupted energy supply, they must know when and where interruptions might occur.
Research is underway to establish new tools that communities can use to power their needs, especially as electricity demand increases. To research the development of such tools, Professor Alberto Lamadrid, Professor of Economics, Co-Associate Director of the Institute for Cyber Physical Energy and Infrastructure (I-CPIE), has become a core faculty member with the Center for Advancing Community Energy Solutions (ACES), one of Lehigh University’s new University Research Centers. The ACES approach focuses on the concept of “electricity sheds.” Like a watershed, an electricity shed gathers the energy production of a region and channels it to the community to power its systems, such as buildings, water, and transportation. Lamadrid’s work on Lehigh’s ARPA-E project served as one window into the energy risk management world, and ACES can use this knowledge to help devise ways for communities to power their needs.
Lamadrid received an ARPA-E PERFORM (Performance-based Energy Resource Feedback, Optimization, and Risk Management program) award in 2020 to develop a tool that would help energy wholesalers predict these interruptions when power might go out. ARPA-E, a program within the Department of Energy, promotes innovative high-impact research in multiple energy sectors. For the three-year project, Lamadrid and his partners (Massachusetts Institute of Technology (MIT), Argonne National Laboratory, Lawrence Livermore National Laboratory, and several industry advisors) worked on developing a decision support system that would help energy wholesalers, which include energy producers, financial institutions, and others, with forecasting information. The information would focus on the real-time market (a 1-hour window) and the forward market (a 24-hour window), providing them with insight about when to expect an energy deviation and what the magnitude of that deviation might be, establishing an electric assets risk bureau.
Understanding energy deviations is important for several reasons. One, when the wholesalers know ahead of time that at least one source of their energy will be diminished, they can take action to find another source: they might buy electricity from another wholesaler, for example. Two, it allows the wholesalers to compensate for variable sources of energy, such as renewable energy sources. These energy sources, such as solar and wind, produce energy intermittently so the energy wholesaler knows it needs another source of energy to fill in during the renewables’ down time. When the solar energy production, for example, is diminished, the system operator might summon more energy from another wholesaler, for example natural gas. These multiple generation sources allow for flexibility and energy supply reliability, but also offer reduced cost: solar power, unlike natural gas or coal, is free.
The goal of the PERFORM project was to focus on this wholesale level and provide independent system operators with a scoring system to help them manage both the real-time and forward markets for electricity. Lamadrid says the system he and his research partners developed is analogous to the credit scores banks rely on to determine if you are a good candidate for repaying a loan. It shows the amount of risk of a power supply problem and the possible magnitude of the problem, much like a financial rating score.
Having this information enables the system operators to find alternative sources of electricity when an issue arises, limiting their risk of being unable to provide power as they are contractually obligated. And it helps them manage two kinds of risk: interruptions to reliable “business as usual” electricity provision, as well as resilient operations while dealing with “high impact low probability” outages. These are rare, one-time events such as those faced by Texas in 2021 when winter storm Uri created increased electricity demand that the system operator could not meet, creating electricity shortages, and more recently, the outage faced by Portugal and Spain in April 2025. Basically, the scoring system helps wholesalers communicate with suppliers and retailers: the scores tell everyone in the system the status of energy supply and demand for both real-time (about an hour ahead) and forward (24 hours ahead) markets. This would create a better-informed market and allow operators, suppliers, and demanders to respond to the uncertainty, lowering the likelihood of disruptions and even blackouts.
While ARPA-E focuses on advancing technology to market, and several projects in the PERFORM cohort have pursued the development of software, Lamadrid is partnering with startups and software firms to advance this and bring a tool that is easy to access and use by electricity market participants and utilities, complying with their security and production requirements.