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Friday, 19 September 2008

Idea generation #50: Markets for energy

I believe in the age of markets and that price is an important mechanism to govern their workings and realise their true potential. Hence, it is with great interest that I am following the progress of smart grids and dynamic pricing in the electricity market that is happening around the world.

On the research front, the GridWise Olympic Peninsula Project is a year-long smart grid research project on price-responsive household technology, dynamic electricity pricing, and consumer behavior. You can read the summary in this NYtimes article. One of the most interesting outcome is the people are behaving like day traders in managing their energy consumption:
Every five minutes, the households and local utilities were buying and selling electricity, with prices constantly fluctuating by tiny amounts as supply and demand on the grid changed.
"Your thermostat and your water heater are day-trading for you," said Ron Ambrosio, a senior researcher at the Watson Research Center of I.B.M.
If this is going to the future, then there is opportunity for a new set of monitoring, trading, information tools for users to manage their energy consumption. There could even be a WeatherBill equivalent to let people hedge their energy risks. Once the electricity market really becomes a truth marketplace, there is room for plenty of smart ideas to be done.

On the more near term end, the smart grid technology space is growing. The NYtimes article has a nice article overviewing this recent market:
Some analysts expect so-called “smart metering” to boom nationwide. ABI Research, a technology firm, estimates that the market will jump to 52 million by 2013, from 560,000 this year — which would be more than a third of the nation’s meters.

I think the next step is be to push these technologies to automate the costs savings, rather than focusing on pure information display. This is akin to the implict web idea, i.e. users need not focus their attention to enjoy the benefits of mining their own data for personal use.
Can it be programmed to respond autonomously to price signals? Can it be programmed to respond to some other type of communication that the consumer can receive under his/her contract with his/her retailer? Can the consumer access the device remotely to change its settings?

In summary, electricity markets are interesting fields to study how a typically government-owned insitution can be transformed into a marketplace that allows for true pricing and innovative products/services. I will keeping my eyes open on this area.