Table of Contents

The Economic Costs and Consequences of Terrorism

The Economic Costs and Consequences of Terrorism

Edited by Harry W Richardson, Peter Gordon and James E. Moore II

This landmark book covers a range of issues concerning the consequences of terrorist attacks. Beginning with a discussion of new policies and strategies, it then delves into specific areas of concern, modeling a range of possible scenarios and ways to mitigate or pre-empt damages.

Chapter 16: Two-sided Electricity Markets: Self-Healing Systems

Richard E. Schuler

Subjects: economics and finance, public sector economics, environment, disasters, politics and public policy, terrorism and security


Richard E. Schuler* Active customer participation in electricity markets, particularly charging buyers for the real-time actual cost of supplying their needs, may lead to a far more reliable system at lower cost than under current practice in the US. In effect, we still have a socialist system of supply that shields customers from the true cost consequences of their purchasing choices. Because like low gasoline prices, the reliable low-cost supply of electricity that is always available on instantaneous demand has become an entitlement for most consumers, it has been extremely difficult politically to institute true realtime retail markets for electricity, even though wholesale markets have been deregulated in many regions of the country for over five years. But since there exists an inverse relationship between system reliability conditions and the real-time price of electricity, raising each and every customer’s awareness of those periodic stresses may not only save customers money, on average, but it may also increase the system’s resilience to insults – both natural and terrorist-induced. Much of the focus on terrorist attacks on the power grid imagines widespread areas of the country without electricity like during the north-east blackout of 15 August 2003. However, as outlined in a recent CREATE report (Zimmerman et al., 2005), unless prolonged over many days, the social impact of massive regional outages is small. Rather, it is extended widespread local outages that result from numerous physical breaks in the local electricity distribution system, each of which must be repaired individually, that can...

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