The competitive electric power industry is not evolving as hoped. Prices are high and changeable; supply is sometimes inadequate; buyers, sellers, and system operators have trouble planning for the future; and perhaps worst of all, nobody is looking out for the welfare of the power system as a whole. MIT experts led by Dr. Marija Ilic have performed a series of studies that should help. They have identified various industry participants, the roles they play, the markets through which they interact, and regulations that will ensure that their actions are fair and supportive of power system performance. By simulating participant behavior and the impacts on power system operation, the researchers have demonstrated that their proposed structure leads to a well-run, efficient, reliable power system and effective customer service. Practical techniques based on the researchers' methodologies could change the look of the power industry. Buyers and sellers of electricity and transmission services could use new techniques to project spot electricity prices and to quantify the potential benefits and risks associated with long-term contracts. System operators could disseminate information on prices and system conditions via the Internet so all participants could know what their options are. Companies could identify investments in new generation and transmission equipment that would be profitable and also beneficial to system operation. Customers might choose less-reliable service at a lower price, permitting system operators to curtail service when demand peaks and thus reduce the idle generating capacity they maintain. Regulators could use new methods to measure the potential for companies to drive up prices during shortages--a potential that the researchers' analyses show is far greater than traditional measures suggest. Regulators could then calculate price caps low enough to protect consumers but high enough to encourage needed investment. New profit-making organizations could expedite critical transfers of electricity from one region to another. Finally, "mini-grids" could arise--self-sufficient, stand-alone systems of interconnected small generating units that would operate with high reliability, deliver different levels of service to individual consumers, and provide a niche market for demonstrating small, flexible, environmentally friendly technologies that are undervalued on traditional power systems.
Last updated: 26-Jul-2001
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