This report describes the implementation and results of a field demonstration wherein residential electric water heaters and thermostats, commercial building space conditioning, municipal water pump loads, and several distributed generators were coordinated to manage constrained feeder electrical distribution through the two-way communication of load status and electric price signals. The field demonstration took place in Washington and Oregon and was paid for by the U.S. Department of Energy and several northwest utilities. Price is found to be an effective control signal for managing transmission or distribution congestion. Real-time signals at 5-minute intervals are shown to shift controlled load in time. The behaviors of customers and their responses under fixed, time-of-use, and real-time price contracts are compared. Peak loads are effectively reduced on the experimental feeder. A novel application of portfolio theory is applied to the selection of an optimal mix of customer contract types. v Executive SummaryPacific Northwest National Laboratory (PNNL) led a field demonstration of smart grid technologies for the U.S. Department of Energy (DOE) and the Pacific Northwest GridWise™ Testbed. The latter is a group composed of several northwest regional utilities, the Bonneville Power Administration (BPA), and PNNL. The overall field demonstration was known as the Pacific Northwest GridWise Testbed Demonstration, composed of two principal projects. This report describes one of these, the Olympic Peninsula Project. The second project, called the Grid Friendly™ Appliance Project, is discussed separately in a companion report. Purpose and ObjectivesThe purpose of the Olympic Peninsula Project was to create and observe a futuristic energy-pricing experiment that illustrates several values of grid transformation that align with the GridWise concept. The central principle of the GridWise concept is that inserting intelligence into electric-grid components at the end-use, distribution, transmission and generation levels will significantly improve both the electrical and economic efficiencies within the electric power system. Specifically, this project, tested whether automated two-way communication between the grid and distributed resources will enable resources to be dispatched based on the energy and demand price signals that they receive. In this manner, conventionally passive loads and idle distributed generators can be transformed into elements of a diverse system of grid resources that provide near real-time active grid control and a broad range of economic benefits. Foremost, the project controlled these resources to successfully manage the power flowing through a constrained feeder-distribution circuit for the duration of the project. In other words, the project tested whether it was possible to decrease the stress on the distribution system at times of peak demand by more actively engaging typically passive resources-end use loads and idle distributed generation.The immediate objectives of the project...

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F. A. Hayek’s elaboration of the difficulty of aggregating diffuse private knowledge is the best-known articulation of the knowledge problem and an example of the difficulty of coordinating individual plans and choices in the unavoidable presence of dispersed, private, subjective knowledge. Prices communicate some of this private knowledge and serve as knowledge surrogates. The knowledge problem has a deep provenance in economics and epistemology. It is a deep epistemological challenge, with which several scholars in the Austrian tradition have grappled. This chapter analyzes the development of the knowledge problem in two main categories: the complexity knowledge problem and the contextual knowledge problem. It also provides an overview of the development of the knowledge problem as a concept with both complexity and epistemic dimensions, its relation to and differences from modern game theory and mechanism design, and its implications for institutional design and robust political economy.