The Current Economy: Electricity Markets and Techno-Economics

By Canay Özden-Schilling

Electricity is a quirky commodity: more often than not, it cannot be stored, easily transported, or imported from overseas. Before lighting up our homes, it changes hands through specialized electricity markets that rely on engineering expertise to trade competitively while respecting the physical requirements of the electric grid. The Current Economy is an ethnography of electricity markets in the United States that shows the heterogenous and technologically inflected nature of economic expertise today. Based on ethnographic fieldwork among market data analysts, electric grid engineers, and citizen activists, this book provides a deep dive into the convoluted economy of electricity and its reverberations throughout daily life.

Canay Özden-Schilling argues that many of the economic formations in everyday life come from work cultures rarely suspected of doing economic work: cultures of science, technology, and engineering that often do not have a claim to economic theory or practice, yet nonetheless dictate forms of economic activity. Contributing to economic anthropology, science and technology studies, energy studies, and the anthropology of expertise, this book is a map of the everyday infrastructures of economy and energy into which we are plugged as denizens of a technological world.

• Language: English
• Publisher: Stanford University Press
• Release date: Jun 15, 2021
• ISBN: 9781503628229

Book preview

THE CURRENT ECONOMY

ELECTRICITY MARKETS AND TECHNO-ECONOMICS

CANAY ÖZDEN-SCHILLING

STANFORD UNIVERSITY PRESS

STANFORD, CALIFORNIA

Stanford University Press

Stanford, California

© 2021 by the Board of Trustees of the Leland Stanford Junior University.

All rights reserved.

No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press.

Printed in the United States of America on acid-free, archival-quality paper

Library of Congress Cataloging-in-Publication Data

Names: Özden-Schilling, Canay, author.

Title: The current economy : electricity markets and techno-economics / Canay Özden-Schilling.

Description: Stanford, California : Stanford University Press, 2021. | Includes bibliographical references and index.

Identifiers: LCCN 2020047026 (print) | LCCN 2020047027 (ebook) | ISBN 9781503612273 (cloth) | ISBN 9781503628212 (paperback) | ISBN 9781503628229 (ebook)

Subjects: LCSH: Electric utilities—United States. | Electric utilities—Social aspects—United States. | Markets—Social aspects—United States. | Expertise—Economic aspects—United States. | Technology—Economic aspects—United States. | Economic anthropology—United States.

Classification: LCC HD9685.U5 O85 2021 (print) | LCC HD9685.U5 (ebook) | DDC 333.793/20973—dc23

LC record available at https://lccn.loc.gov/2020047026

LC ebook record available at https://lccn.loc.gov/2020047027

Cover design: Andrew Brozyna

FOR TOM

CONTENTS

Acknowledgments

Introduction: The Current Economy

1. Regulating

2. Representing

3. Optimizing

4. Protesting

Epilogue: Techno-Economics

Notes

Bibliography

Index

ACKNOWLEDGMENTS

I began to explore the ideas that would become The Current Economy at the Massachusetts Institute of Technology in the Program in History, Anthropology, and Science, Technology and Society, where I was a doctoral student. During my time at what is affectionately known as HASTS, I had the opportunity to work with exceptional mentors. Over the years, Mike Fischer’s mentorship has broadened my horizons in countless ways and given me models of scholarly thinking that I can only hope to emulate. I am endlessly grateful to Stefan Helmreich for tirelessly sharpening my ruminations into arguments and encouraging me to be a better thinker. From Susan Silbey, I have learned the methods of scholarly pursuit. Finally, since my first days in graduate school at New York University, Tim Mitchell has inspired me to feed my curiosity into the questions that matter. Among the affiliates of HASTS, I have been grateful to the reading, support, and encouragement of David Kaiser, Heather Paxson, Harriet Ritvo, Chris Walley, and Susann Wilkinson. Karen Gardner’s friendship was as indispensable as her guidance in navigating administrative waters.

At MIT and in greater Cambridge, I had the distinction of having the loveliest friends one could hope to have in graduate school. Shreeharsh Kelkar manages to bring fun and joy to every day. Shira Shmuely will forever be my sister. Ashawari Chaudhuri and Lucas Müller have been steady sources of understanding and kindness. Amah Edoh and Marie Burks know how much I relied on them during my Cambridge years. A larger group of fellow graduate students knew when my research needed one more citation and/or one more beer. In HASTS past and present, they include Orkideh Behrouzan, Renée Blackburn, Kieran Downes, Xaq Frohlich, Amy Johnson, Clare Kim, Grace Kim, Nicole Labruto, Crystal Lee, Jia Hui Lee, Lan Li, Xi Emily Lin, Lisa Messeri, Teasel Muir-Harmony, Peter Oviatt, Luisa Reis Castro, Beth Semel, David Singerman, Ellan Spero, Mitali Thakor, Michaela Thompson, Nate Deshmukh Towery, and Ben Wilson. Beyond HASTS, Aslı Arpak, Ekin Kurtiç, Andy Rosing and Stephen Tapscott, Aytuğ Şaşmaz, and Mengqi Wang made Cambridge a better place.

The research that went into this book was made possible thanks to many generous people. I thank the market analysts, traders, engineers, market participants, and citizen activists who brought markets to life for me in long conversations. I would like to particularly thank Marija Ilić and her team for hosting and humoring me in Pittsburgh. My activist friends in West Virginia and Illinois gave me new critical thinking skills and taught me to have fun along the way. I am endlessly excited about future conversations with them. Financial support for the research was provided by the Wenner-Gren Foundation for Anthropological Research.

Over the years, I have been fortunate to be able to develop and share the key arguments of this book with excellent audiences by way of invited lectures, workshops, and journal pages. I am especially grateful to Simone Abram, Hayal Akarsu, Andrea Ballestero, Dominic Boyer, Stephen Collier, Elizabeth Ferry, Stephanie Friede, Gökçe Günel, Sheila Jasanoff, Leksa Lee, Miriam Posner, Antina von Schnitzler, Brit Ross Winthereik, and Caitlin Zaloom. Among the audiences to which I had the chance to present my research, I would like to particularly acknowledge the Department of Sociology at the National University of Singapore, which I am thrilled to join soon as faculty. At Stanford University Press, it was a privilege to work with Michelle Lipinski and Margo Irvin. I am humbled by the incredibly productive and generous reviews by the anonymous reviewers. Needless to say, all of this book’s errors are mine.

Chapter 2 draws on the following, previously published article: The Infrastructure of Markets: From Electric Power to Electronic Data. Economic Anthropology 3 (1): 68–80. Published Wiley-Blackwell, © 2016 American Anthropological Association. Parts of the following article are reproduced in the Introduction: Economy Electric. Cultural Anthropology 30 (4): 578–588. Published Wiley-Blackwell, © 2015 American Anthropological Association.

This book was written in Baltimore during a postdoctoral fellowship at Johns Hopkins University. At Hopkins, I had the invaluable opportunity to work with three outstanding scholars as part of an invigorating Sawyer Seminar, Precision and Uncertainty in a World of Data. Naveeda Khan’s intellectual strength, enthusiasm, and much-appreciated humor continue to be irreplaceable. I will forever cherish the modes of responsible and caring scholarship I have learned from Veena Das, as well as her support and warmth. Jeremy Greene, in addition to inspiring me with his prolific scholarship (and prolific running), has gifted me the title of this book. All four of us and the Seminar were kept afloat by Sam Gomes’s expert administrative assistance. For making the Anthropology Department a welcoming place, I would like to also extend my gratitude to Alessandro Angelini, Michael Degani, Niloofar Haeri, Clara Han, Nicole Labruto, Anand Pandian, Deborah Poole, and Valeria Procupez. During the final stage of revisions, writing sessions with Hayal Akarsu and Shreeharsh Kelkar were a critical source of camaraderie and sustenance.

In Baltimore, many friends have tremendously contributed to this book by letting me drone on about academic minutiae and giving me plenty of reasons to look forward to breaks. In particular, I am grateful to Maggie Epps, Nicole Aranda, and their families, for making Baltimore home. I can’t wait to raise our families together and support each other through the good, the bad, and the pandemic.

My parents, Aytül and Ercan Özden, have always had the unwarranted conviction that I knew what I was doing with my life. I have always relied on their unconditional trust, and for that, I am thankful. Over the years, my nuclear family grew to include wonderful new people. I thank the extended Schilling clan for being so fun to hang out with and so reassuring a presence. My gratitude goes particularly to Gail Schilling, who taught my son about flowers while I was racing this book to the finish line.

I am still in awe of the good fortune that has put me on the same path as my favorite person, my center and my destination, my partner in all things, Tom Özden-Schilling. It beats me how he can be as supportive, loving, and caring as he is, but he always finds a way, no exceptions. This book wouldn’t have come to fruition without his unwavering, stubborn encouragement, and for that, it is dedicated to him. Finally, Leo cheered me on from inside my belly when this book was still in its early stages. His entire life overlapped with the book’s writing and revisions. No matter how many books I write, words will always fail me when I try to describe how much his love sustains me. Together we grow each day and there is nothing more important. The next book is for you, benim güzel oğluşum.

INTRODUCTION

The Current Economy

Electricity is ordinary. The denizens of the fully electrified world tend to take its continued presence for granted and are startled by moments of its interruption, like blackouts or brownouts.¹ But electricity is also extraordinary, and not only because, over the course of less than a century and a half within its introduction, it has had a transformative effect on how social life is experienced in urban spaces (Nye 1992) and households (Cowan 1983). Electricity is an extraordinary commodity—not one to be used in economics textbooks to demonstrate the purported laws of supply and demand.

First, electricity is very difficult to store. It cannot wait in a warehouse, like clothes or even perishable foods can to varying degrees, while consumers make up their minds or wait for the right price. Many industrialists are currently racing to produce, and produce cheaply, the first grid-level batteries big enough to hold power plants’ worth of electricity; in the meantime, most electricity produced in power plants needs to be consumed almost immediately, lest extra supply or sudden loss hurt the wires through which electricity moves. (That is when blackouts may occur.) Second, electricity’s transportation is peculiar. Many commodities lend themselves to alternative modes of transportation. Buyers and sellers may switch from air to sea to land, and from shipper to shipper within each mode, in search of lower costs. Electricity, on the other hand, is married to its transportation infrastructure—the electric grid—until the day it can be stored, boxed, and loaded up onto trucks. Furthermore, demand for electricity is what economists often consider inelastic, which means it barely changes based on changes in prices. Consumers, after all, struggle to conceive of substitutes for electricity when the power goes out.

For at least the second half of the twentieth century, electricity served as a literal textbook example of how there simply could not be markets in certain commodities (Ulbrich 1991). In discussing electricity, textbooks held that competition is impractical, inconvenient, or simply unworkable (McConnell 1960, quoted in Ulbrich 1991, 179) and obviously uneconomical (Samuelson 1958, quoted in Ulbrich 1991, 179). The initial investment in infrastructure was simply too high for many competitors to undertake, just like in other businesses considered public utilities—water, natural gas, and mail delivery. According to these textbooks, each of these situations called for a natural monopoly—a single firm licensed and regulated by a state or government to serve a demarcated territory. That the electricity industry was the archetypal natural monopoly was received wisdom in economics in the early 1980s, when Richard Schmalensee, an economist from the Massachusetts Institute of Technology (MIT) who studied the regulation of electric utilities, was having a chat with officials from the Ronald Reagan administration along with his colleague Paul Joskow. During the chat, the officials, to Schmalensee and Joskow’s shock, casually floated the idea of deregulation in the electricity industry—the idea to break up the monopolies and initiate market competition. Could there be many producers competing to sell their electricity in the same territory instead of one vertically integrated company producing, transmitting, and delivering it all by itself?

In a conversation that I shared with Schmalensee in his office in 2013, the economist remembered himself and Joskow struggling to contain their incredulity: ‘Wait, what? Uh, no! They’re natural monopolies! I mean, there’s only one set of wires. You can’t have competing wires!’ To that, he remembered the officials responding, You sure? It works everywhere else.² Other infrastructural systems across the US, Reagan’s officials reminded the economists, were being or had been deregulated at a record pace. Airlines. Trucking. Telecommunications. Within a year or two of that chat, Joskow and Schmalensee wrote one of the first works in the world that addressed the possibility of deregulation in electricity in depth and advised, albeit cautiously, a path toward allowing competition in the generation of electricity (1983).

Less than a decade later, in 1992, the Energy Policy Act passed in the US with clauses that allowed states to break up electricity monopolies. Today, in sixteen states, electricity can be produced, transmitted, and retailed by different entities. In 1996 and 1998, the Federal Energy Regulatory Commission (FERC) took further measures to make competition in electricity a reality. FERC required all transmission operators to open the use of the grid on a nondiscriminate basis to the newly minted buyers and sellers. It also defined rules for transmission operators to run markets for electricity. Market specifically meant a commodity exchange, like other commodity exchanges in cotton, wheat, or crude oil, where prices are established periodically by processing a multitude of bids and offers for each megawatt of electricity. Seven electricity markets in the US have come online since. The combined footprint of electricity markets amounts to some two-thirds of the contiguous US. Territorial monopolies, in other words, now make up the minority of the American electricity business. What is more, consumers are taking on more active roles in these markets as our everyday electronics, from electric vehicles to air conditioners, begin to interface with these markets. Once a prime example of economic impossibility, electricity markets have become an unambiguous reality.

What happened? If electricity is so incongruent with our existing ideas of markets, what does it take to build markets in electricity—what kinds of work and expertise are involved in making, maintaining, and inhabiting them? What can we learn from this about the locus of market-building ambition and authority in our contemporary moment in capitalism? In the twenty-first century US, how are domains of social life previously governed by nonmarket reasonings turned into markets—who creates and maintains new markets where none existed before? How do different actors, from traders to everyday consumers, inhabit these new markets? This book sets out to answer these questions.

Electricity’s quirks as a commodity come up rather quickly when one starts to talk to people familiar with the business. When I first became interested in electricity markets as a doctoral student in anthropology, I sat in a graduate-level class about electricity regulation offered by MIT’s Engineering Systems Division. There, almost every lecture was built around a unique issue related to electricity’s physics that made it a business unlike most others. Electricity traveled through the electric grid, for instance, following the path of least resistance. There is no such thing as, say, blue electricity, said the instructor, an electrical engineer who had become a market regulator. You can’t say, I want my electricity to come from X power plant. Then I began to meet electricity traders and market analysts at happy hours in Boston. I noticed how often they, too, brought up electricity’s quirks and its essential roles in everyday life—always with smiles on their faces, broadcasting their own fascination with the object of their trade. They spoke, for instance, of how they needed to calibrate their price models every year right before the Super Bowl in anticipation of a massive simultaneous surge in electricity demand to run televisions across the country. From electricity physics to data science to optimization, these experts each had different areas of focus, but for all of them, their expertise was informed by electricity’s particular exigencies. Gradually, I also became aware of everyday electricity consumers who protested the infrastructure expansion projects encouraged by electricity markets. They spoke of their sense of property ownership, again, in a way that was informed by the layout of the electric grid, like the farmers who described to me how close the transmission wires hung to their crops.

This book reports on ethnographic work with several kinds of groups that design, maintain, and critique markets in electricity. Each chapter is a building block in examining the puzzle that animates this book—how a market is made, maintained, and inhabited in an unlikely commodity like electricity. Throughout this endeavor, I document several different kinds of practice, expert and otherwise, which all take electricity as its object. These include the work of engineer-economist teams who theorized the mathematics of price-making formulas for markets that would honor electricity’s physics; data workers who create computational representations of electricity that enable remote trade by far-flung actors; optimization and behavioral research experts who invent better ways to balance the supply and demand of electricity; and citizen activists whose experiences with the electric grid lead them to demand more just mechanisms for the exchange of electricity. To explore how the natural monopoly days are being left behind, this book takes us to the cultural settings of a variety of electricity-focused groups. These cultures, I argue, are what give electricity its markets today—in forms that are diverse, contested, yet unambiguously real.

The title of this book, The Current Economy, works in two ways. One is specific to the markets of electricity; at the ethnographic level, the book shows a robust, humming economy built around the fleeting current of electricity in the contemporary US. The other points at a larger phenomenon in contemporary capitalism, one about which electricity’s markets have much to teach us. The book sketches the contours of the economies in which we currently live—economies built and maintained, technologically, by specific groups of workers. I seek to show that novel economic reasonings, market-making ambition, and expertise originate in heterogenous technological domains. Only rarely, furthermore, do these critical facets of contemporary markets develop from the explicit borrowing or trickling down of explicit ideologies. We live, in other words, with the products of the economic imaginations of electrical engineers, data experts, optimization experts, among others—and not merely the imaginations of policymakers or economists whose expertise receives vastly more attention in popular and scholarly critiques of contemporary economic orders. By way of an economic ethnography of electricity in the US, The Current Economy seeks to explore the heterogenous and technologically informed nature of economic expertise, imaginations, and aspirations today.

Work Cultures

It is nine in the morning on a Monday. I enter the ballroom of an upscale hotel in Northampton, Massachusetts, arranged like a classroom with long desks facing a projector screen. At the check-in desk, a smiling woman hands me my name tag, a thick binder full of printouts, and a calculator. Like the few dozen people around me, I find a seat that I will wind up keeping over the course of a densely scheduled week. Soon, representatives from the Independent System Operator of New England (ISO-NE) will take the stage one after the other to explain how they run their electricity market. Theirs is one of the seven markets in the United States and nine in North America for the exchange of electricity, and still a new creation (about two decades-old at the time of this writing). We go around the room to introduce ourselves; with the exception of me and another researcher (a graduate student in economics), every participant is here because their employment entails doing business with New England’s electricity market.

There are electricity traders who are switching to New England’s market after having traded in different electricity markets. There are regulators from state regulation agencies. There are engineers from electric utilities, who will, over the course of the week, grow most interested when an occasional piece of electric grid equipment is passed around. There are accountants, one of whom during our lunch break together will sheepishly admit to struggling to follow the technical discussions: I just want to match the numbers. The twenty-something trader sitting to my right listens to the instructor while his eyes are glued to his phone. In whispered remarks throughout the sessions, a disgruntled power plant engineer sitting to my left waxes nostalgic to me about premarket days. We each have come to this room with different kinds of expertise, priorities, and beliefs; we will feel out of place or at home accordingly as instructors bring up the different slices of the phenomenon that is markets in electricity. Perhaps one manager from an electricity generation company comes closest to articulating our shared goal: I’m here to understand how we make money. We are here to understand how electricity and money are made to move alongside each other in the twenty-first century, in the US, in a complex new economy.

But we don’t always understand so well. Many of us endure and even enjoy solving the simplistic price calculation exercises we are given. The accountants are particularly good at this. But, through their comments at different sessions throughout the week, it becomes clear that many attendees continue to be nagged by simple yet existential questions about how markets in electricity can even exist in the first place—a service, we intuitively know, is so subconsciously and spontaneously consumed. One participant shouts, My fridge doesn’t want to only work when the price is low. Another, in a dramatic gesture, walks to the light switch in the room and turns the lights off to ask, somewhat daringly, how the market will account for this minute but unexpected change in demand. The trader to my left, still comfortably glued to his phone, is unfazed by these protests; he thinks there can be a market in anything. When he has heard something he truly does not understand, like how power plants’ fuel type sets a price window, he finally puts down his phone, sits up, and raises his hand. The power plant engineers in the room brush him off; it is just about the physics of electricity production. Later, it is time for those engineers to be vexed by the matter of why and how virtual trading (buying and selling on paper for profit) is allowed in electricity markets. Isn’t the entire point of the business, they ask, actually producing and consuming electricity?

This scene demonstrates the heterogeneity of priorities and expertise in electricity markets. It reflects the many kinds of work required to put an electricity market in place. As the following chapters show, this work may be more or less harmonious. The policymaking effort in the 1990s, like the legal acts that removed the obstacles in the way of competition in electricity, was but a small part of this collective process. To this day, Schmalensee remembers those officials from the Reagan administration as wide-eyed ideologues, people who merely liked the sound of deregulation and free markets, who naively assumed that markets could be generic, and that competition could be copied from business to business, from airlines, to trucks, to telecommunications, to electricity. But copying would not do the job; several groups, whose work cultures coalesced around electricity and specific toolkits developed to address its properties, have eased electricity into market circulation and continue to give shape to its economy.

Figure I-1. Independent System Operators (ISOs) or Regional Transmission Organizations (RTOs) in the United States and Canada. Each one of these entities operates an electricity market. Source: ferc.gov.

To trace the origins and trajectories of the expertise that animates these markets, I suggest that researchers enter the laboratories, offices, and classrooms, where such expertise is produced and passed on. Only there, I argue, can scholars discern whether the knowledge and practices that make markets work are direct imports from policymaking or economics circles. When such an exercise is conducted in the field of electricity, we come across original economic modes of reasoning, which resist straightforward alignment with broader ideologies. We see experts at work, removed from sustained government funding or expertise, enacting their economic reasonings in everyday life and work by designing and maintaining markets with a wide reach. I suspect this originality is not unique to experts of electricity and the making of markets in electricity.

I suggest, in other words, delving deep into a variety of work cultures for answers about contemporary market building and maintenance practice. I define these as cultures of sustained work with materials and their associated properties, assisted by particular toolkits, be it electric meters, spreadsheets, or applied mathematics. These toolkits predispose experts to diagnose particular kinds of problems in the social world and, over time, generate and uphold corresponding kinds of actions to treat those perceived problems. Work cultures are technological; they come to being as actors respond to the properties of certain materials and design interventions into these materials’ social lives. Sometimes, these interventions have an economic character—the character of having the potential to distribute and redistribute resources or wealth at a societal level.

In anthropology and Science and Technology Studies (STS), interest has exploded in recent decades in the figure of the expert, an actor whose skill and epistemic authority have societal ramifications (for a review, see Carr 2010). I use work cultures in this book instead of cultures of expertise (Boyer 2008, 44), not to signal a categorical difference between work and expertise, but to accentuate the sense of modesty and ordinariness with which many of my interlocutors approach their work. For the purposes of this book, the concept includes other forms of technological labor that are often accorded less epistemic authority in critical studies of expertise: labor like that of electricity trade’s database workers or those workers whom Lilly Irani calls data janitors (2015). This work can also include so-called domestic