1. Discussion topic/case study: Benefits of SMART Grid technology and consumer savings. How to save money by basing the demand for electricity on marginal cost rather than average cost. If you like to listen to music, write term papers, or do laundry in the middle of the night, your local electricity grid would like to thank you. Why? Because you are using electricity when it is least costly to generate. The problem is that energy cannot be stored efficiently on a large scale. So power plant operators maintain both the main power stations that are designed to run continuously, as well as smaller powerplants that operate only during periods of peak demandsuch as during daytime working hours or periods of extreme outside temperatures. These smaller power plants are more expensive to operate, incurring higher marginal cost per kilowatt generated than the average cost of generating a kilowatt (that is, cost averaged over kilowatts generated by the large and small plants). According to the U.S. Government Accountability Office, it can cost up to 10 times more to generate electricity during a summer afternoon (when air conditioners are running at maximum capacity) compared to nighttime. But consumers typically aren't aware that the marginal cost of electricity varies over the course of a day or according to the weather. Instead, consumers see prices on their electricity bills based on the average cost of electricity generation. As a result, electricity demand is inefficienttoo high during high marginal cost periods and too low during low marginal cost periods. In the end, consumers end up paying more than they should for their electricity, as utility companies must eventually raise their prices to cover production costs. To solve this inefficiency, utility companies, appliance manufacturers, and the federal government are working together to develop SMART Grid technologiesthat help consumers adjust their usage according to the true marginal cost of a kilowatt in real time. "Smart" meters have been developed for home use, which allow the price to the consumer to vary according to the true marginal costwhich the consumer can see. And appliances such as dishwashers, refrigerators, dryers, and hot water heater shave been developed to run when electricity rates are lowest. Studies have consistently shown that when consumers see the real marginal cost fluctuations and are asked to pay accordingly, they scale back their consumption during peak demand times. Clearly, SMART Grid technologies are just an application of smart economics.

Questions to answer

1) Explain what the case study is about. How can consumers increase their welfare using knowledge about cost concepts? Apply relevant cost concepts and graphs we studied in class ,such as, marginal cost, fixed costs, variable cost, etc.

2) Explain about the economic aspects of using smart grid technology. You can use academic journal articles, podcasts, news articles, and books

3)Following excerpts are from Smart Grid Economics:

If you like to listen to music, write term papers, or do laundry in the middle of the night, your local electricity grid would like to thank you. Why?

......smaller power plants are more expensive to operate, incurring higher marginal cost per kilowatt generated than the average cost of generating a kilowatt

....... it can cost up to 10 times more to generate electricity during a summer afternoon (when air conditioners are running at maximum capacity) compared to nighttime.

Your next task is to find relevant data to confirm at least one of the above-mentioned findings from the case study. Specifically, gather data and plot it for at least one of the followings:-

Data regarding 24-hour household electricity usage.

-Data regarding the cost of electricity generation during 24-hour day.

-Data regarding the consumer electricity price during 24-hour day.

Your data can be for a specific geographical location (e.g., district, county, state)or country. Use MS Excel/Google Sheets to plot relevant graphs. Some sources of data may include: PLEASE SHOW THE GRAPH

-US Department of Energy

-US Government Accountability Office

-US Energy Information Administration

-Federal Reserve Economic Data, etc