Liberalisation and decarbonisation have transformed energy system coordination from internal engineering to a complex economic and digital challenge. Liberalisation replaced vertically integrated utilities with fragmented interactions among transmission operators, distribution operators, generators, retailers, and aggregators, exposing information asymmetries and congestion externalities. Decarbonisation adds a more demanding coordination layer with binding net-zero timetables requiring gigawatt-scale renewable integration, electrification of heat and transport, and coupling of electricity with hydrogen, gas, and district-heating networks. These changes multiply temporal and spatial interdependencies, extending coordination needs from annual planning to minute-by-minute operations and from single-vector to cross-vector orchestration. This paper argues that, beyond technology cost, a rising central challenge of the energy transition is coordination under complexity. Drawing on economic theory alongside evidence from Great Britain and continental Europe, we show that coordination frictions arise because actors either lack the right information, face misaligned incentives, operate on incompatible clocks, or work with mismatched standards and regulatory silos. These frictions exist both vertically (across system layers) and horizontally (across peers and vectors), and are amplified by digitalisation, cyber risks, climate shocks, geopolitics, and new infrastructure models. Institutional design shapes outcomes: where an authoritative focal point exists (e.g., the UK’s National Energy System Operator), probabilistic forecasting, standardised queues and coordinated planning compress the strategy space for distributed actors; where competitive platforms are available (e.g., local flexibility marketplaces), open interfaces and common products allow heterogeneous resources- e.g., storage, electric vehicle fleets, flexible demand- to reveal private information and transact at sub-daily horizons. We conclude that hybrid governance-i.e., markets and networks operating beneath a strategic, carbon-aligned hierarchy- offers an information-efficient path that internalises cross-vector externalities and embeds carbon compliance into operational decision-making. The practical implication of our analysis is that at this stage of energy transition reducing systemic coordination frictions is likely to yield larger system benefits than marginal reductions in unit technology costs.
