A commentary on how Smart Grids require regulatory reform is posted at Reason.com, which is a monthly print magazine of “free minds and free markets.”
The obsolete electro-mechanical electric power network, built by and for a monopoly industry, cannot support the kind of growth experienced during the last 20 years in so many other industries. All that stands in the way of vibrant, customerfriendly electricity products and services is an outdated infrastructure run by hesitant monopolies and regulated by bureaucrats with little incentive to improve things. We can do smarter.
…by reducing the cost of information flow to and from consumers, smart grid subsidies may contribute to the erosion and ultimate disappearance of state-level regulatory barriers to retail competition. Telecommunication deregulation sprang from similarly modest roots.
I agree that implementing Smart Grids needs to occur in conjunction with regulatory reform to open the system up to dynamic and transparent competition. Smart Grids themselves are technology neutral. They can either reinforce centralized command-and-control models of operation or they can open up the sector to dynamic competition and innovation.
Keeping the electricity grid physically balanced in terms of frequency and voltage prevents blackouts (which cost about $160 billion per year) and is the primary performance metric on which utilities are evaluated. While some consumers are OK with having the power company manipulate their air conditioners, others find it downright Orwellian. But the same outcome could be achieved by allowing consumers to receive and respond to real-time price signals themselves, instead of just leaving it all up to the producer. Decentralized coordination is ultimately more efficient and empowering than imposed control.