Smart Meter Implementation Should be Left up the Free Market

True North has recently ran a couple of articles on Burlington’s quest to adopt “Smart Meters” as a means of saving on power costs. See here and here. It has also reported on Vermont’s desire to become a “Laboratory” to Test the Smart Grid System.

In principle the implementation of smart meters and a smart grid are a good idea. The idea is to make the delivery of power “smarter” so it is more efficiently delivered to where it is most needed and not wasted where it is not needed. While it is a good idea in principle, in practice it has a few bugs and some critics think that it is more costly than it is worth. There are also privacy concerns being raised. These issues have already been discussed in the aforementioned True North articles. I would like to take a different approach in examining this issue. That approach is the advisability of having government come in and pick winners and losers during the early adoption phase of a relatively new technology. I believe that the problems associated with the smart meter/smart grid issue are a matter of the inevitable bugs that always accompany the adoption of new technology. Such problems are typically solved by a trial and error process where the best solution eventually wins out. In time, it is entirely possible that the problems of cost and privacy that many see with smart meters now, can be overcome.

This is less likely to happen if governments rush into the process before the trial and error process plays out and adopts a current product. The impatience with an electric grid that is long over due for an overhaul temps some to jump the gun and have government entities short circuit the trial and error process. The process is sometimes slow and cumbersome, but is necessary if the kinks associated with the adoption of a new technology are to be worked out.

Historically, the best solutions have been unforeseen, which is why the trial and error process of working out the bugs is best left up to the free market. One of the best examples that I can think of off hand is the move toward high definition television. Japan had the earliest working HDTV system, with design efforts going back to 1979. The system was further developed by NHK Science & Technology Research Laboratories in the 19080’s.

Here in America there were numerous calls for the government to get behind a push to catch up with the Japanese in the area of high definition television. The notion was that our relatively free market approach was too chaotic to compete with the Japanese approach that allowed for more central planning by the government. There were a few dissenting voices among free market thinkers who pointed out that the HDTV system developed by the Japanese was based on an advanced version of analogue technology. They pointed out that the future of HDTV was in digital and the approach that the Japanese were pursuing would soon become obsolete. Fortunately, we did not employ the government to marshal massive resources in support of an approach that the free market would soon render obsolete.

In essence, we have a similar argument today in regards to the creation of a smart grid as part of an overhaul of our archaic power infrastructure. Are we going to assume, like the early adopters of HDTV that we know what the final shape that the smart grid and smart powering monitoring will take? History would suggest that the answer to that question is no. It would also suggest that using the government to marshal resources behind a current approach is the best way to squander resources by pushing an approach that the free market will eventually render obsolete. Not only does the central planning approach squander resources, but it short circuits the trial and error process, which kills of innovation.

The free market approach is often slow and seemingly chaotic, but is has the advantage of not putting the bulk of our resources behind an approach that does not work as well.