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Creating a Smarter U.S. Electricity Grid

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  • Paul L. Joskow

Abstract

This paper focuses on efforts to build what policymakers call the "smart grid," involving 1) improved remote monitoring and automatic and remote control of facilities in high-voltage electricity transmission networks; 2) improved remote monitoring, two-way communications, and automatic and remote control of local distribution networks; and 3) installation of "smart" metering and associated communications capabilities on customer premises so that customers can receive real-time price information and/or take advantage of opportunities to contract with their retail supplier to manage the consumer's electricity demands remotely in response to wholesale prices and network congestion. I examine the opportunities, challenges, and uncertainties associated with investments in "smart grid" technologies. I discuss some basic electricity supply and demand, pricing, and physical network attributes that are critical for understanding the opportunities and challenges associated with expanding deployment of smart grid technologies. Then I cover issues associated with the deployment of these technologies at the high voltage transmission, local distribution, and end-use metering levels.

Suggested Citation

  • Paul L. Joskow, 2012. "Creating a Smarter U.S. Electricity Grid," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 29-48, Winter.
  • Handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:29-48 Note: DOI: 10.1257/jep.26.1.29
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.1.29
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    References listed on IDEAS

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    1. Paul L. Joskow, 2006. "Markets for Power in the United States: An Interim Assessment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-36.
    2. Severin Borenstein & Stephen Holland, 2005. "On the Efficiency of Competitive Electricity Markets with Time-Invariant Retail Prices," RAND Journal of Economics, The RAND Corporation, pages 469-493.
    3. Ralph Turvey, 1968. "Peak-Load Pricing," Journal of Political Economy, University of Chicago Press, vol. 76, pages 101-101.
    4. Severin Borenstein, 2007. "Customer Risk from Real-Time Retail Electricity Pricing: Bill Volatility and Hedgability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 111-130.
    5. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, pages 191-211.
    6. Peter O. Steiner, 1957. "Peak Loads and Efficient Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 71(4), pages 585-610.
    7. Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
    8. Severin Borenstein, 2005. "The Long-Run Efficiency of Real-Time Electricity Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 93-116.
    9. Severin Borenstein, 2007. "Wealth Transfers Among Large Customers from Implementing Real-Time Retail Electricity Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 131-150.
    10. Thomas Taylor & Peter Schwarz & James Cochell, 2005. "24/7 Hourly Response to Electricity Real-Time Pricing with up to Eight Summers of Experience," Journal of Regulatory Economics, Springer, vol. 27(3), pages 235-262, January.
    11. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-242, September.
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    Citations

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    Cited by:

    1. Rabindra Nepal & Flavio Menezes & Tooraj Jamasb, 2014. "Network Regulation and Regulatory Institutional Reform: Revisiting the Case of Australia," Discussion Papers Series 510, School of Economics, University of Queensland, Australia.
    2. Ströhle, Philipp & Flath, Christoph M., 2016. "Local matching of flexible load in smart grids," European Journal of Operational Research, Elsevier, vol. 253(3), pages 811-824.
    3. Rious, Vincent & Perez, Yannick & Roques, Fabien, 2015. "Which electricity market design to encourage the development of demand response?," Economic Analysis and Policy, Elsevier, pages 128-138.
    4. Kim, Sung Tai & Lim, Byung In & Park, Wan Kyu & Kim, Myoung Kyu & Son, Sung-Yong, 2016. "An analysis on the effectiveness of a smart grid test-bed project: The Korean case," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 868-875.
    5. Woo, C.K. & Sreedharan, P. & Hargreaves, J. & Kahrl, F. & Wang, J. & Horowitz, I., 2014. "A review of electricity product differentiation," Applied Energy, Elsevier, pages 262-272.
    6. Schuelke-Leech, Beth-Anne & Barry, Betsy & Muratori, Matteo & Yurkovich, B.J., 2015. "Big Data issues and opportunities for electric utilities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 937-947.
    7. Upton, J. & Murphy, M. & Shalloo, L. & Groot Koerkamp, P.W.G. & De Boer, I.J.M., 2015. "Assessing the impact of changes in the electricity price structure on dairy farm energy costs," Applied Energy, Elsevier, pages 1-8.
    8. Broberg, Thomas & Persson, Lars, 2016. "Is our everyday comfort for sale? Preferences for demand management on the electricity market," Energy Economics, Elsevier, vol. 54(C), pages 24-32.
    9. Rahmani, Mohsen & Jaramillo, Paulina & Hug, Gabriela, 2016. "Implications of environmental regulation and coal plant retirements in systems with large scale penetration of wind power," Energy Policy, Elsevier, vol. 95(C), pages 196-210.
    10. repec:eee:joepsy:v:61:y:2017:i:c:p:1-14 is not listed on IDEAS
    11. Nepal, Rabindra & Menezes, Flavio & Jamasb, Tooraj, 2014. "Network regulation and regulatory institutional reform: Revisiting the case of Australia," Energy Policy, Elsevier, vol. 73(C), pages 259-268.
    12. Bae, Mungyu & Kim, Hwantae & Kim, Eugene & Chung, Albert Yongjoon & Kim, Hwangnam & Roh, Jae Hyung, 2014. "Toward electricity retail competition: Survey and case study on technical infrastructure for advanced electricity market system," Applied Energy, Elsevier, pages 252-273.
    13. Lang, Corey & Siler, Matthew, 2013. "Engineering estimates versus impact evaluation of energy efficiency projects: Regression discontinuity evidence from a case study," Energy Policy, Elsevier, vol. 61(C), pages 360-370.
    14. repec:eee:eneeco:v:65:y:2017:i:c:p:458-470 is not listed on IDEAS
    15. Olsthoorn, Mark & Schleich, Joachim & Klobasa, Marian, 2015. "Barriers to electricity load shift in companies: A survey-based exploration of the end-user perspective," Energy Policy, Elsevier, pages 32-42.
    16. Cosmo, Valeria Di & O’Hora, Denis, 2017. "Nudging electricity consumption using TOU pricing and feedback: evidence from Irish households," Journal of Economic Psychology, Elsevier, pages 1-14.
    17. Lamadrid, Alberto J. & Maneevitjit, Surin & Mount, Timothy D., 2016. "The economic value of transmission lines and the implications for planning models," Energy Economics, Elsevier, vol. 57(C), pages 1-15.
    18. Massetti, Emanuele & Ricci, Elena Claire, 2013. "An assessment of the optimal timing and size of investments in concentrated solar power," Energy Economics, Elsevier, vol. 38(C), pages 186-203.
    19. Pepermans, Guido, 2014. "Valuing smart meters," Energy Economics, Elsevier, vol. 45(C), pages 280-294.

    More about this item

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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