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Creating a Smarter U.S. Electricity Grid

  • Paul L. Joskow

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.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.1.29
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 26 (2012)
Issue (Month): 1 (Winter)
Pages: 29-48

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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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  1. Paul L. Joskow, 2005. "Markets For Power In The United States - An Interim Assessment," Working Papers 0512, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  2. 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.
  3. Ralph Turvey, 1968. "Peak-Load Pricing," Journal of Political Economy, University of Chicago Press, vol. 76, pages 101.
  4. 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.
  5. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
  6. 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.
  7. 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, 01.
  8. 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.
  9. Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
  10. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
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