PROMOTING INNOVATION IN THE ELECTRICITY INDUSTRY

Smart metering can bring significant benefits to electricity markets by allowing customers to reduce demand or increase supply when generation capacity is temporarily scarce. To reap the full efficiency and environmental benefits of this technology, regulators must allow price volatility and free entry into the market. The efficiency gains are enormous as both demand and supply will be affected by both temporary and longer-lasting price changes. Experiments have shown the value of this approach. Copyright (c) 2010 The Author. Journal compilation (c) Institute of Economic Affairs 2010. Published by Blackwell Publishing, Oxford.