[powerbroker]

>> I envision a future where individual appliances (including EVs) can opt in to spot pricing for the electricity they consume

When 1,000 devices jump on the grid the moment electricity hits $0.01/kWh, the demand spike will cause more generators to come back on line and increase the price back to $0.05/kWh -- thus causing the 1,000 devices to drop-off the grid.

Rinse, lather, repeat.

How do you compensate for the potential grid instability?

[Ajedi32]

Generators aren't going to spin up just to cover a brief fluctuation like that. It would cause too much wear on the system, so most likely anyone selling electricity to the grid via generators would program their system to only turn on when it predicts the price change will last more than a few seconds.

Assuming instability does actually become a problem though, that sounds like a very straightforward technical problem with many possible solutions. Just off the top of my head, the simplest market-based solution would likely be futures trading. If all these appliances reserve their electricity usage 10 seconds in advance, then sellers can know exactly how much demand there'll be and adjust their production accordingly, maybe even bidding on that capacity so they know in advance exactly how much they'll need to produce. I imagine the high-frequency trading industry probably has tons of experience with this sort of thing.