Production of electricity in the United States is entering a period of dramatic transformation. Yet, despite broad-based support for a smarter energy grid in many states and the federal government, a combination of socioeconomic, technological, and legal barriers sometimes impede deployment of smart grid systems. The barriers include information gaps, capital constraints, poor pricing methods, and outdated laws. Market failures also exist in the form of network effects, high transaction costs, and technology spillovers from investments in learning-by-doing. It is clear that large-scale transformation of the electric utility sector will not occur unless these barriers are better understood, and then neutralized or circumvented.
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