The Adoption of New Smart-Grid Technologies: Incentives, Outcomes, and Opportunities

The Adoption of New Smart-Grid Technologies: Incentives, Outcomes, and Opportunities

The Adoption of New Smart-Grid Technologies: Incentives, Outcomes, and Opportunities

The Adoption of New Smart-Grid Technologies: Incentives, Outcomes, and Opportunities

Synopsis

Studies in the academic and gray literatures have touted the potential large-scale benefits of a smart grid for the United States. Despite an overall lack of technological constraints, however, the empirical evidence shows a potential gap between ex ante expectations and ex post realizations of the benefits of modernization, as well as some reluctance on the part of utilities and consumers to adopt or use the technologies as expected. The surge in technological deployment during the early 2010s, in fact, was a result of federal funding via the American Recovery and Reinvestment Act of 2009. In this report, RAND Corporation researchers review the current technical, regulatory, and economic context of the electricity market and theoretical benefits of developing a smart grid. They then discuss some of the entrepreneurial opportunities associated with smart-grid data once the grid is fully modernized. Next, they examine the existing empirical evidence related to smart-grid adoption and implementation and investigate the potential reasons for these experiences. Finally, they offer some policy suggestions that might help overcome the identified barriers and discuss their relative merits.

Excerpt

New technologies have created significant opportunities for electric-grid modernization that will allow for enhanced communications between transmission and distribution operators and consumers. This communication layer, its associated enabling technologies, and the infrastructure necessary to deliver electricity are collectively known as the smart grid. A fully functional smart grid has been estimated to bring large net benefits to society through the ability to more efficiently manage transmission, distribution, and consumption of electricity, as well as incorporate and integrate intermittent renewable-resource fuels and distributed-generation technologies. However, some evidence suggests that either the net benefits have been overestimated or incentives are not aligned for current utilities and customers to fully modernize the grid.

This report reviews the current status of smart-grid development, including some entrepreneurship opportunities and the barriers to achieving a fully modernized grid. We identify some recommendations to help overcome these barriers and detail the policy levers available to regulators under the incumbent regulatory system to incent (or discourage) adoption.

This research was sponsored by the Kauffman-RAND Institute for Entrepreneurship Public Policy (KRI), housed within the RAND Institute for Civil Justice. KRI is dedicated to assessing and improving legal and regulatory policymaking as it relates to small businesses and entrepreneurship in a wide range of settings, including health care and civil justice.

The intended audience for this report includes electricity industry professionals, consumers of electricity, researchers, and policymakers who help shape the environment in which the electric market operates. The report should be of interest to any group or individual seeking to understand the barriers to grid modernization and some of the potential opportunities that overcoming these barriers may present. This study complements previous RAND research conducted within the RAND Environment, Energy, and Economic Development Program, which addresses topics relating to environmental quality and regulation, water and energy resources and systems, climate, natural hazards and disasters, and economic development, both domestically and internationally.

Kauffman-RAND Institute for Entrepreneurship Public Policy

The Kauffman-RAND Institute for Entrepreneurship Public Policy is dedicated to assessing and improving policymaking as it relates to entrepreneurship. Entrepreneurship can help address critical issues and enhance value in important sectors, including health care and civil justice, by developing new ways to serve people whose needs are not currently being met . . .

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