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Traditional electricity planning in the United States has typically been focused on forecasting future demand and identifying the need for new large generating facilities that involve one-way flows from central power plants to customers. However, legal innovation has incentivized the deployment of more energy resources at the customer end of the electricity network and technological innovation has facilitated rapid expansion in the number and capacity of these distributed energy resources. These changes now require innovation in the type of planning for future energy resources that must be employed to ensure an efficient and reliable electric energy network. Deployment of the rapidly growing number of distributed energy resources —solar and wind generation, combined heat and power, fuel cells, battery storage, demand response and energy efficiency—is facilitated by an increasingly smart grid. This chapter proposes a new, distributed resource-planning process to better integrate all of these distributed resources into the grid.

This chapter discusses several classes of potential games that are common in the literature and how to derive the Nash equilibrium for such games. It first considers identical interests games and dummy games before turning to decoupled games and bilateral symmetric games. It then describes congestion games, in which all players are equal, in the sense that the cost associated with each resource only depends on the total number of players using that resource and not on which players use it. It also presents other potential games, including the Sudoku puzzle, and goes on to analyze the distributed resource allocation problem, the computation of Nash equilibria for potential games, and fictitious play. It concludes with practice exercises and their corresponding solutions, along with additional exercises.

In 1976, when BPA was aggressively promoting nuclear power projects, Ken Lay had yet to form Enron, and Paul Joskow was still years away from conceiving the blueprint of a restructured utility industry, Amory Lovins, then a 29-year old consultant physicist, published a now famous article, “Energy Strategy: The Road Not Taken,” in Foreign Affairs. Drawing on Robert Frost’s poetic image, he saw two contrasting energy paths the nation might follow over the next fifty years: a hard path relying on centralized fossil fuel and nuclear power stations to increase energy supply and a soft path based on efficiency and renewable energy sources. The commitment to a long-term coal economy, he prophesied, would double atmospheric carbon dioxide concentration early in the next century. Described as the “enfant terrible of the energy left,” Lovins became a prolific author and proponent of sustainable energy whose urgent recommendations were dismissed by utility and nuclear interests but eventually gained mainstream credibility. He urged an end to fossil fuel subsidies and early on advocated a severance royalty, now called a carbon tax, in order to place renewable energy – wind, solar, and biomass – on an equal footing by reflecting the costs of externalities such as pollution and climate change. A brilliant promoter of his ideas, Lovins invented the concept of the negawatt – a theoretical unit of power representing the amount of energy saved (measured in watts) as a direct result of energy conservation or increased efficiency. Over time conservation gained political traction, finding expression in state and federal law supporting demand-side resources. In a recent book, Reinventing Fire, Lovins envisages several different possible scenarios for the future of the U.S. electricity system. One of these, “Renew,” charts a future in which by 2050 centralized renewables account for 80 percent of U.S. electricity generation. “Transform,” an even more ambitious forecast, envisions a radical change in the centralized grid architecture that has existed since Edison’s time, using distributed resources – rooftop solar, fuel cells, and small-scale wind coupled with smart meters – to create interlinked microgrids that can run in conjunction with the grid or seamlessly disconnect. Lovins relies on clean energy’s economic fundamentals rather than (as he earlier did) carbon pricing. His prescription has met with countervailing views from many energy economists but gains support from renewables’ recent market penetration. He remains a voice of cautious optimism in an otherwise bleak energy worldview.

Some maintain that people lack a human right to health because this right cannot provide guidance for distributing scarce resources. Even if the skeptics are right on this point, the second chapter suggests that is not a reason to reject the right; the role of the human right to health is to provide a kind of hope that can foster the virtue of creative resolve. This resolve is a fundamental commitment to finding creative solutions to what appear to be tragic dilemmas. Rather than helping one decide how to ration scarce resources, the human right to health provides reason to find ways to fulfill everyone’s claims. The hope this right provides gives us a response to apparent tragedy in motivating us to search for ways of avoiding it—rather than an account of distributive justice.