A New Paper, and Presenting It at Conferences This Week

Lynne Kiesling

My co-author David Chassin and I have a new working paper available at SSRN from the GridWise Olympic Peninsula testbed demonstration project:

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

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.

I will be presenting this paper at the International Society of New Institutional Economics meeting and the International Association of Energy Economics meeting over the next week. If you’ll be at either conference, I hope to see you there!