Re: [Pen-l] smart grid question

[ehrbar <ehrbar@xxxxxxxxxxxxxxxxxxx>]

Michael Perelman asked:

> How much will a smart grid facilite Enron-like pricing?

The smart grid allows real-time pricing, and this allows homeowners to
install computer programs which turn up the thermostat of the air
conditioner when electricity becomes too expensive.  It also allows
homeowners to give the utility company permission to delay the start
of the refrigerator or washer if there is a spike in electricity use.
Etc., many more uses.  It is a completely different paradigm.

The next two paragraphs I'm not so sure about, but here is how I
understand it.  Please correct me if it's wrong.  This same smart grid
technology, I think, would also allow one home to buy electricity from
one supplier, and the home next door to buy electricity form a
completely different supplier.  I.e., it allows the liberalization of
electricity markets, the separation of the transmission/distribution
utility from the power generation.

This separation is a necessity for renewable energy which comes from
many distributed suppliers.  A few utility companies see their role
increasingly as mediators between generators and consumers, rather
than as fully vertically integrated sellers of electricity to
consumers.  Others stick to the old business model as vertically
integrated sellers of electricity and therefore fight against
distributed renewable energy.  Instead of PVC panels and co-generation
and windmills owned by households and small businesses, they prefer
huge windfarms and arrays of concentrating solar owned by the utility
company itself.  They oppose what some call the democratization of
power generation.  For instance, Utah artificially centralizes
renewable energy in so-called renewable energy zones, although one of
the biggest advantages of renewable energy is their distributed
character -- renewable energy is everywhere.  The defenders of this
antiquated centralized business model are the ones who like to scare
the consumers with Enron.  An answer would be: although the smart grid
allows liberalized energy markets, it is not dependent on liberalized
energy markets.  Distributed renewable energy and smart grid are
easily possible with a regulated utility.

Another scare story about the smart grid: the smart grid allows the
Child Protective Services to see how much food you have in the
refrigerator, and if the refrigerator is too empty, they will take
your children away from you.  Seriously, I saw that somewhere on the
web.

In my opinion, the smart grid will very soon be the limiting factor
for renewable energy, vehicle to grid, etc.  It takes 5 years or more
to install the smart grid; by that time, electric cars will be rolling
off the assembly lines en masse.  Many utility companies fight the
smart grid with the excuse of it being too expensive, lack of
standards, technology too new and may be superseded next year by
something better.  These are all issues, but I suspect they want to go
slow with the smart grid also because they want to stick with the
antiquated business model of centralized power monopolies for as long
as possible.

Hans.

Hans G. Ehrbar   http://www.econ.utah.edu/~ehrbar ehrbar@xxxxxxxxxxxxxxxxxx
Economics Department, University of Utah     (801) 581 7797 (my office)
1645 Campus Center Dr., Rm 308               (801) 581 7481 (econ office)
Salt Lake City    UT 84112-9300              (801) 585 5649 (FAX)
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