A review of electricity product differentiation

Chi-Keung WOO, P. Sreedharan, J. Hargreaves, F. Kahrl, J. Wang*, I. Horowitz

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

57 Citations (Scopus)

Abstract

This review is motivated by our recognition that an adequate and reliable electricity supply is a critical element in economic growth. From a customer's perspective, electricity has several distinct attributes: quality, reliability, time of use, consumption (kW. h) volume, maximum demand (kW), and environmental impact. A differentiated product can be formed by packaging its non-price attributes at a commensurate price. The review weaves the academic literature with examples from the real world to address two substantive questions. First, is product differentiation a meaningful concept for electricity? Second, can product differentiation improve grid operations and planning, thereby lowering the cost of delivering electricity services? Based on our analysis and comprehensive review of the extant literature, our answer is "yes" to both questions. We conclude that applying product differentiation to electricity can greatly induce end-users to more effectively and efficiently satisfy their demands upon the system, and to do so in an environmentally friendly way.

Original languageEnglish
Pages (from-to)262-272
Number of pages11
JournalApplied Energy
Volume114
DOIs
Publication statusPublished - Feb 2014

Scopus Subject Areas

  • Building and Construction
  • Energy(all)
  • Mechanical Engineering
  • Management, Monitoring, Policy and Law

User-Defined Keywords

  • Electricity economics
  • Grid operations and planning
  • Product differentiation

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