Drift in Practice: How Energy Markets Slowly Lose Coherence
Energy markets continue to function. Power is delivered. Prices clear. Institutions meet their mandates. From the outside, the system appears intact.
That appearance is precisely what makes drift difficult to recognise.
Drift does not present itself as crisis. It presents itself as continuity — a system doing what it has always done, even as the conditions that once made it coherent slowly change. The danger is not sudden failure, but gradual misalignment between a system’s purpose, its rules, and the reality it operates within.
This form of energy market drift is difficult to detect precisely because the system continues to deliver electricity while losing structural coherence.
Energy markets offer a clear example of how this process unfolds.
What drift looks like in a real system
In abstract terms, drift occurs when a system’s design assumptions no longer match the environment it faces, yet its operating logic remains largely unchanged. No single decision causes the problem. No actor is required to act irresponsibly. The system continues to function, but it does so less effectively with each adjustment.
This dynamic was outlined in our earlier analysis of
The risk of drift in large systems — where misalignment emerges not through neglect, but through sustained, well-intentioned management.
In energy markets, this misalignment is subtle. Supply and demand are still allocated. Prices still signal scarcity. Regulation still governs participation. Yet beneath this surface, the relationship between market outcomes and system objectives has weakened.
Markets designed to optimise efficiency now struggle to support resilience. Pricing mechanisms intended to reflect physical realities increasingly abstract them away. Governance structures meant to adapt over time respond incrementally, while the underlying system evolves structurally.
Drift emerges not because the system is unmanaged, but because it is managed without being re-examined.
The original design assumptions
Most modern energy markets were built around a coherent and defensible set of assumptions.
Supply was centralised, predictable, and largely controllable. Generation followed demand. Physical constraints were relatively stable. Long-lived infrastructure justified slow-moving regulatory frameworks. Markets were optimised to deliver electricity efficiently under these conditions.
Within that context, pricing mechanisms worked. Institutional responsibilities were clear. Risk could be managed within known bounds. The system’s rules aligned closely with its physical and economic reality.
The problem is not that these assumptions were flawed. It is that they were durable — and durability can outlast relevance.
How misalignment accumulated
Drift did not arrive with a single reform or technological shift. It accumulated quietly, through a series of reasonable adaptations.
Technology moved faster than governance
Generation became more distributed and more variable. Storage, interconnection, and demand-side participation altered how electricity flows and how scarcity is experienced. Market structures adjusted incrementally, layering new rules onto old foundations rather than revisiting core design choices.
Incentives optimised locally
Participants responded rationally to the incentives they faced. Traders optimised against price signals. Producers responded to market design. Regulators addressed problems as they emerged, often narrowly, within their remit.
Each action made sense in isolation. Collectively, they produced outcomes no one explicitly intended.
Drift does not require bad incentives — only incentives that no longer add up to the system’s original purpose.
Metrics replaced meaning
Over time, price became the dominant proxy for system health. Other objectives — reliability, resilience, long-term capacity — remained formally acknowledged but operationally secondary.
When metrics become targets, they lose their ability to guide.
Why the system still appears stable
Despite these misalignments, energy markets have not failed. This is not accidental.
Buffer mechanisms absorb stress. Emergency interventions stabilise outcomes. Exceptional measures become routine without being formally recognised as such. Complexity itself obscures causality, making it difficult to distinguish structural strain from ordinary volatility.
The system compensates for its own misalignment. Each intervention restores functionality while subtly normalising the conditions that required it.
Drift survives because it remains manageable — until it no longer is.
Signals that are easy to miss
Drift leaves traces, but they rarely resemble alarms.
Interventions become more frequent. Policy exceptions persist longer than intended. The gap widens between stated objectives and operational outcomes. Responsibility fragments as complexity grows, making accountability harder to assign.
These are not failures. They are structural tells — indications that the system is working harder to deliver the same results.
What drift makes harder over time
The most significant cost of drift is not inefficiency or even instability. It is loss of adaptability.
As misalignment deepens, corrective action becomes more expensive. Policy options narrow. Structural reform becomes riskier because the system relies increasingly on its existing compensations. Shocks, when they occur, are harder to absorb.
Drift does not guarantee failure. It makes recovery more costly and less certain.
Beyond energy
Energy markets are not unique. They are simply a system where physical constraints, economic incentives, and institutional design intersect clearly enough for drift to be observed.
The same dynamics appear wherever complex systems persist under changing conditions — in governance, finance, technology, and infrastructure.
Understanding drift is not about predicting collapse or assigning blame. It is about recognising when systems continue to function while slowly losing alignment with their own purpose.
That recognition determines whether adaptation remains possible.
