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Andlinger Center Events

Date: February 25, 2013

Time: 4:30 p.m. -

Location: Computer Science 104

Professor Frank Wolak, of Stanford University, presents “Using Economics to Increase the Intelligence of the Smart Grid” on February 25, 2013 as part of the 2012-2013 Highlight Seminar Series.

Over the past 20 years, electricity supply industries throughout the world have transitioned from the vertically-integrated monopoly regime to a wholesale market regime.   This transition has dramatically altered the economic incentives faced by firms at all stages of the production process as well as electricity consumers.   This talk will first characterize how the incentives created by electricity re-structuring have altered the behavior of firms and consumers at all stages of the production process, often in ways that ultimately increase the costs of supplying wholesale electricity and the retail prices that consumers face.   It will then summarize research on several aspects of the re-structured regime designed to improve overall industry performance.   Topics discussed include:   (1) dynamic pricing programs and protocols for providing information about a customer’s electricity consumption to reduce monthly electricity bills and reduce the level and volatility of wholesale prices, (2) a procedure for valuing transmission expansions that accounts for new sources of benefits of transmission expansions in a wholesale market regime, (3)  forward market financial instruments that provide strong incentives for suppliers to offer to sell wholesale electricity at the lowest possible price, and (4) the design of short-term market pricing mechanisms that account for all relevant network operating constraints and thereby reduce the total cost of supplying energy to all locations in the transmission network.  The talk will also highlight the significant regulatory barriers to implementing many policies (supported by the research discussed) that would increase the likelihood that consumers realize significant benefits from electricity industry re-structuring.

Frank A. Wolak is the Holbrook Working Professor of Commodity Price Studies in the Department of Economics at Stanford University. His fields of specialization are Industrial Organization and Econometric Theory. His recent work studies methods for introducing competition into infrastructure industries — telecommunications, electricity, water delivery and postal delivery services — and on assessing the impacts of these competition policies on consumer and producer welfare. From January 1, 1998 to March 31, 2011, Wolak was the Chair of the Market Surveillance Committee of the California Independent System Operator for electricity supply industry in California. He is a visiting scholar at University of California Energy Institute and a Research Associate of the National Bureau of Economic Research (NBER). He currently directs the Program on Energy and Sustainable Development (PESD) in the Freeman-Spogli Institute (FSI) for International Studies.