Small-scale Energy Sources, When Collectively Managed, Significantly Impact Market Efficiency Reducing the Influence of Large Utility Companies
New INFORMS Journal Manufacturing & Service Operations Management Study Key Takeaways:
- Aggregating distributed energy resources (DERs) can significantly challenge and diminish the market power of traditional, large-scale electricity generators.
- This method can lead to lower energy costs and make renewable energy more accessible and competitive.
- This approach encourages the use of renewable energy sources, promoting environmental sustainability.
BALTIMORE, MD, November 12, 2024 – New research in the INFORMS journal Manufacturing & Service Operations Management is guiding the development of more inclusive and efficient electricity markets. The work demonstrates how aggregating small-scale, distributed energy resources (DERs) like solar panels can effectively balance the power of large utility companies.
“This modeling has the potential to lower energy costs and make renewable energy more accessible and competitive, fostering a greener and more equitable energy future,” says Zuguang Gao of the University of California, Irvine.
The study, “Aggregating Distributed Energy Resources: Efficiency and Market Power,” was conducted by Gao, alongside John Birge of the University of Chicago and Khaled Alshehri of King Fahd University of Petroleum and Minerals.
“This approach encourages the use of renewable energy sources, promoting environmental sustainability,” says Birge, Hobart W. Williams Distinguished Service Professor of Operations Management in the Booth School of Business. “Additionally, it can empower local communities and small-scale energy producers, leading to a more democratized energy market.”
This paper explains how small energy sources like solar panels can be grouped together to more effectively sell power in big electricity markets.
“We found the best approach that makes sure everyone gets a fair deal and the market stays efficient. This can reduce the influence of big power companies, making it easier for smaller players to compete,” continued Gao, a professor in the Paul Merage School of Business at UC Irvine.
This research stands out because of its innovative approach to integrating DERs into electricity markets.
“It not only addresses the technical and economic aspects of energy aggregation but also delves into the market dynamics, showing how small-scale renewable energy sources can reduce the market power of traditional large-scale providers. This dual focus on both efficiency and market competition, especially in the context of renewable energy integration, distinguishes our work from similar studies in the field,” concludes Birge.
About INFORMS and Manufacturing & Service Operations Management
INFORMS is the leading international association for data and decision science professionals. Manufacturing & Service Operations Management, one of 17 peer-reviewed journals published by INFORMS, is a premier academic journal that covers the production and operations management of goods and services including technology management, productivity and quality management, product development, cross-functional coordination and practice-based research. More information is available at www.informs.org or @informs.
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443-757-3578