Abstract

http://ssrn.com/abstract=1417580
 
 

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Beneficial Complexity: A Field Experiment in Technology, Institutions, and Institutional Change in the Electric Power Industry


L. Lynne Kiesling


Northwestern University

David Chassin


Government of the United States of America - Pacific Northwest National Laboratory

June 10, 2009


Abstract:     
This paper presents and analyzes the results of a recent field experiment in which residential electricity customers in Washington State with price-responsive in-home devices could use those devices to change their electricity consumption autonomously. Doing so also required an important institutional change: the regulatory institutions had to change to allow dynamic pricing. Customers could choose a retail pricing contract from a portfolio of contracts, instead of the fixed, regulated retail rate. Here we focus on the results of the real-time contract, under which homeowners participate in a double auction with a market clearing occurring every five minutes. These customers saved money, and their peak demand (and pressure on infrastructure at peak capacity) fell by 15 percent. Moreover, this combination of technology and institutional design enabled decentralized coordination, and we use complexity science to interpret results that show that the real-time market outcomes were those of a self-organizing and scalable complex adaptive system. We also draw policy implications from these results.

Number of Pages in PDF File: 28

Keywords: electricity, technology, regulation, institutional design, dynamic pricing

JEL Classification: L50, L94, L98, D40, C45, C93

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Date posted: June 10, 2009  

Suggested Citation

Kiesling, L. Lynne and Chassin, David, Beneficial Complexity: A Field Experiment in Technology, Institutions, and Institutional Change in the Electric Power Industry (June 10, 2009). Available at SSRN: http://ssrn.com/abstract=1417580 or http://dx.doi.org/10.2139/ssrn.1417580

Contact Information

L. Lynne Kiesling (Contact Author)
Northwestern University ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
David Chassin
Government of the United States of America - Pacific Northwest National Laboratory ( email )
P.O. Box 999
Richland, WA 99352
United States
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