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Regulation of an Electric Power Transmission Company

Thomas-Olivier Leautier

Year: 2000
Volume: Volume21
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No4-3
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Abstract:
Designing regulatory contracts for the operators of power transmission networks has become a critical policy issue in the United States. In this paper, a regulatory contract is proposed that induces network operators to optimally expand the grid, which is crucial for the emergence of efficient wholesale power markets, while also satisfying the other traditional regulatory objectives. The proposed mechanism is readily implementable, since it builds on a contract currently in place in England and Wales.



Is Mandating "Smart Meters" Smart?

Thomas-Olivier Leautier

Year: 2014
Volume: Volume 35
Number: Number 4
DOI: 10.5547/01956574.35.4.6
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Abstract:
The advent of "smart meters" will make possible Real Time Pricing (RTP) of electricity: customers will face and react to wholesale spot prices, thus consumption of electric power will be aligned with its opportunity cost. This article determines the marginal value of a fraction of demand (or a consumer) switching to RTP, conditional on smart meters installation. First, it establishes sufficient conditions for the marginal value of RTP to be decreasing as the fraction of customers on RTP increases. Second, it derives this marginal value for a simple yet realistic specification of demand. Finally, using data from the French power market, it estimates that, for the vast majority of residential customers whose peak demand is lower than 6 kVA, the net surplus from switching to RTP is lower than 1 €/year for low demand elasticity, 4 €/year for high demand elasticity. This finding casts a doubt on the economic value of rolling out smart meters to all residential customers, for both policy makers and power suppliers.



The Impact of Regulation on a Firm's Incentives to Invest in Emergent Smart Grid Technologies

Paulo Moisés Costa, Nuno Bento and Vítor Marques

Year: 2017
Volume: Volume 38
Number: Number 2
DOI: 10.5547/01956574.38.2.pcos
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Abstract:
This paper analyzes the implementation of new technologies in network industries through the development of a suitable regulatory scheme. The analysis focuses on Smart Grid (SG) technologies which, among others benefits, could save operational costs and reduce the need for further conventional investments in the grid. In spite of the benefits that may result from their implementation, the adoption of SGs by network operators can be hampered by the uncertainties surrounding actual performances. A decision model has been developed to assess the firms' incentives to invest in "smart" technologies under different regulatory schemes. The model also enables testing the impact of uncertainties on the reduction of operational costs, and of conventional investments. Under certain circumstances, it may be justified to support the development and early deployment of emerging innovations that have a high potential to ameliorate the efficiency of the electricity system, but whose adoption faces many uncertainties.



Investing in Smart Grids: Assessing the Influence of Regulatory and Market Factors on Investment Level

Yvonne Vogt Gwerder, Nuno Carvalho Figueiredo, and Patricia Pereira da Silva

Year: 2019
Volume: Volume 40
Number: Number 4
DOI: 10.5547/01956574.40.4.ygwe
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Abstract:
This paper explores how market and regulatory factors affect stakeholders' investments in smart grid projects in Europe. Distribution System Operators (DSOs), universities, and technology manufacturers are leading investors, with a cumulative 2286 M€ financed since 2002. Statistical tests were conducted on these groups' investments in smart grid projects in the EU-28, Norway, and Switzerland from 2008-2015, to evaluate the influence of the following factors on investment: the level of distribution sector concentration, the regulatory mechanism in place, and the existence of innovation stimulus mechanisms. The level of distribution sector concentration did not significantly influence investments by these three groups. Market-minded stakeholders, such as DSOs and technology manufacturers, invested more in countries that employed hybrid, incentive, or innovation-stimulus mechanisms; meanwhile, collaborative knowledge-seeking institutions, such as universities, were not swayed by these factors. Taking these findings into consideration will help policy makers design adequate incentives for stakeholders.





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