Dr. C.K. Woo, Dr. Priya Sreedharan, Dr. Jeremy Hargreaves, and Dr. Fredrich Kahrl of E3 were co-authors on a recent paper “A review of electricity product differentiation” published in Applied Energy. 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. We concluded 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.