Yesterday I attended a conference at Carnegie-Mellon on valuation of distributed monitoring and sensing technologies. One of the primary benefits of distributed sensing is that it reduces transaction costs and information costs, thus leading to more efficient transactions and to the developement of new products, services, and markets. Sadly, this benefit is really, really hard to quantify.
So in the “when you have a broken leg you see lots of them” department, I was very interested to see article on traffic congestion websites in the WSJ today (subscription required). I think there are some lessons from traffic congestion information commerce that are directly applicable to electric power. According to the WSJ:
Several online traffic-information companies have made major improvements to their direct-to-consumer services. Using upgraded street-level monitors installed by government agencies, these Web-based reports give live traffic conditions — often with video — for commuting routes, calculate emissions, money and hours saved taking alternate routes, and even send an email or text message telling drivers what to expect when they get behind the wheel.
The federal government is part of the push to make these services more mainstream. It has helped launch traffic-detection Web sites in more than 20 states, most recently Florida and Idaho, and is giving states more discretion in how they spend their transportation budgets, an incentive that could allow states to vastly improve the network of cameras and sensors used by traffic sites.
In this case, the remote sensors are a government initiative, and the website information services are private and commercial. Another service that follows a similar model is weather forecasting (although the Accuweather folks think that NOAA goes too far in providing basic information, undercutting their ability to profit from providing weather services).
Is this a good model for the electric power network? Is the public benefit of reduced transaction costs high enough (or the entrenched barriers to doing it privately too high) that the installation of remote sensors should be a government initiative? I think this is an open question. Clearly there are substantial private benefits, but they may be so diffuse, and so obscured by the benefits to incumbent interests of maintaining the information-lite status quo, that a concentrated investment in sensing technology could contribute to more competitive markets. I offer this idea in the spirit of my long-standing belief that the role of public policy should be to reduce transaction costs that inhibit the private, mutually beneficial exchange of economic agents. But I am leery about recommending such government involvement in capital investment.
More on this as I think it through.
Oh, and of course, traffic sensing technology would create even more value if coupled with a road pricing system. What if the sensors communicate both to the toll gate and to customers when toll prices change dynamically because of varying congestion conditions? How cool would that be?