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Paying for the smart grid

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  • De Castro, Luciano
  • Dutra, Joisa
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    Abstract

    Smart grid technologies may bring substantial advantages to society, but the required investments are sizable. This paper analyzes three main issues related to smart grids: reliability, demand response and cost recovery of investments. In particular, we show that generators will lose profits as a direct effect of demand response initiatives, and most of the benefits of smart grids cannot be easily converted into payments. Moreover, there are potential issues in the choices made by utilities for providing smart grids, and the reliability pertinent to smart grids is a kind of public good.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 40 (2013)
    Issue (Month): S1 ()
    Pages: S74-S84

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    Handle: RePEc:eee:eneeco:v:40:y:2013:i:s1:p:s74-s84

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    Web page: http://www.elsevier.com/locate/eneco

    Related research

    Keywords: Smart grid; Demand response; Demand response effect; Reliability; Social planner problem in electricity markets; Public good; Regulation of utilities; Investment decisions by utilities;

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    1. Joskow, Paul & Tirole, Jean, 2004. "Retail Electricity Competition," IDEI Working Papers 311, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Paul L. Joskow & Jean Tirole, 2004. "Reliability and Competitive Electricity Markets," NBER Working Papers 10472, National Bureau of Economic Research, Inc.
    3. Stephen P. Holland & Erin T. Mansur, 2007. "Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance," NBER Working Papers 13508, National Bureau of Economic Research, Inc.
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    5. S. Borenstein, 2013. "Effective and Equitable Adoption of Opt-In Residential Dynamic Electricity Pricing," Review of Industrial Organization, Springer, vol. 42(2), pages 127-160, March.
    6. repec:rje:randje:v:37:y:2006:i:4:p:799-815 is not listed on IDEAS
    7. Severin Borenstein & Stephen P. Holland, 2003. "On the Efficiency of Competitive Electricity Markets With Time-Invariant Retail Prices," NBER Working Papers 9922, National Bureau of Economic Research, Inc.
    8. Ahmad Faruqui & Sanem Sergici, 2010. "Household response to dynamic pricing of electricity: a survey of 15 experiments," Journal of Regulatory Economics, Springer, vol. 38(2), pages 193-225, October.
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