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Distributed Reliability

67 Pages Posted: 2 Oct 2015 Last revised: 5 Dec 2015

Amy L. Stein

University of Florida Levin College of Law

Date Written: December 4, 2015

Abstract

For the past century, electric utilities and grid operators have both owned and operated resources to maintain the reliability of the grid. This reliability has been controlled through investments in generation, transmission, and distribution assets. Today, a growing number of previously passive customers are much more involved in generating their own electricity. But this customer involvement does not stop with generation. Customers are also contributing energy storage and demand response to the grid, reliability resources that are an essential component of supporting intermittent, renewable energy. This Article draws upon economic analyses of industrial organization and principal-agent theory to illuminate the tensions caused by the separation of ownership of these reliability resources from those who control the reliability of the grid. Given the current decentralized structure of the utility industry and the regulatory limits on utility ownership of these reliability resources, it then argues for mechanisms that allow for a more successful integration of these privately owned energy resources into a public grid.

Keywords: energy, renewable energy, energy storage, reliability, electric grid, distributed energy resources, separation of ownership and control, theory of the firm, make or buy, make and buy, customer ownership, reliability resources, transaction costs, asymmetric information, divergent interests

JEL Classification: L22, L94, L14, K32, K10, K23, D82, G18, H41

Suggested Citation

Stein, Amy L., Distributed Reliability (December 4, 2015). University of Colorado Law Review, (2016, Forthcoming); University of Florida Levin College of Law Research Paper No. 15-23. Available at SSRN: https://ssrn.com/abstract=2667703

Amy L. Stein (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States
352-273-0953 (Phone)

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