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The Economics of the Smart Grid

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  • Luciano De Castro

Abstract

Smart Grid (SG) technologies may bring substantial advantages to society, but the required investments are also sizable. This paper establishes a framework for examining the issues related to the SG, and highlights some of the difficulties in establishing a mechanism for paying SG costs. In particular, we show that generators will lose profits as a direct effect of demand response initiatives, and most of the benefits of SG cannot be easily converted into payments. JEL Code: D61,H42, D62,L51

Suggested Citation

  • Luciano De Castro, 2011. "The Economics of the Smart Grid," Discussion Papers 1544, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1544
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    File URL: http://kellogg.northwestern.edu/faculty/decastro/htm/personal/smartgrid.pdf
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    References listed on IDEAS

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    1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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    Cited by:

    1. Smith, Alexander M. & Brown, Marilyn A., 2015. "Demand response: A carbon-neutral resource?," Energy, Elsevier, vol. 85(C), pages 10-22.

    More about this item

    Keywords

    Smart Grid; Energy Economics; Cost-Benefit Analysis; Demand Response; Demand Response Formalization;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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