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A regulatory framework for an evolving electricity sector: Highlights of the MIT utility of the future study

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  • Ignacio J. Pérez-Arriaga, Jesse D. Jenkins, and Carlos Batlle

Abstract

The electric power sector is once again evolving. A variety of distributed energy resources and improving computation, communication, and control technologies create an unprecedented degree of choice for electricity consumers, choices that are poorly guided by electricity rates and other incentives designed for a comparatively simpler era. These technologies also create new tools for regulated utilities, competitive suppliers, and other businesses to employ in the provision of electricity services. This paper summarizes the findings of a two-year, multidisciplinary MIT Energy Initiative research effort, the Utility of the Future study, and outlines a framework for proactive electricity regulation, market, and policy reform designed to enable the efficient evolution of the power sector over the next decade and beyond. Recommendations include a comprehensive system of efficient prices and charges for all electricity users, enhanced regulation of distribution utilities, careful reconsideration of industry structure to avoid conflicts of interest, and improvements to electricity markets. Together, this framework is intended to establish a level playing field for the provision and consumption of electricity services and enable the integration of a cost-effective combination of centralized generation, conventional network assets, and emerging distributed resources, whatever that mix may be.

Suggested Citation

  • Ignacio J. Pérez-Arriaga, Jesse D. Jenkins, and Carlos Batlle, 2017. "A regulatory framework for an evolving electricity sector: Highlights of the MIT utility of the future study," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:eeepjl:eeep6-1-perezarriaga
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    Cited by:

    1. María Teresa Costa‐Campi & Néstor Duch‐Brown & José García‐Quevedo, 2019. "Innovation strategies of energy firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(5), pages 1073-1085, September.
    2. Freitas Gomes, Icaro Silvestre & Perez, Yannick & Suomalainen, Emilia, 2020. "Coupling small batteries and PV generation: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 126(C).
    3. Marius Buchmann, 2019. "How decentralization drives a change of the institutional framework on the distribution grid level in the electricity sector – the case of local congestion markets," Bremen Energy Working Papers 0031, Bremen Energy Research.
    4. Defeuilley, Christophe, 2019. "Energy transition and the future(s) of the electricity sector," Utilities Policy, Elsevier, vol. 57(C), pages 97-105.
    5. Hoarau, Quentin & Perez, Yannick, 2019. "Network tariff design with prosumers and electromobility: Who wins, who loses?," Energy Economics, Elsevier, vol. 83(C), pages 26-39.
    6. Ussama Assad & Muhammad Arshad Shehzad Hassan & Umar Farooq & Asif Kabir & Muhammad Zeeshan Khan & S. Sabahat H. Bukhari & Zain ul Abidin Jaffri & Judit Oláh & József Popp, 2022. "Smart Grid, Demand Response and Optimization: A Critical Review of Computational Methods," Energies, MDPI, vol. 15(6), pages 1-36, March.
    7. Stede, Jan & Arnold, Karin & Dufter, Christa & Holtz, Georg & von Roon, Serafin & Richstein, Jörn C., 2020. "The role of aggregators in facilitating industrial demand response: Evidence from Germany," Energy Policy, Elsevier, vol. 147(C).
    8. Hoarau, Quentin & Perez, Yannick, 2018. "Interactions between electric mobility and photovoltaic generation: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 510-522.
    9. Savelli, Iacopo & Morstyn, Thomas, 2021. "Electricity prices and tariffs to keep everyone happy: A framework for fixed and nodal prices coexistence in distribution grids with optimal tariffs for investment cost recovery," Omega, Elsevier, vol. 103(C).
    10. Freitas Gomes, Icaro Silvestre & Perez, Yannick & Suomalainen, Emilia, 2021. "Rate design with distributed energy resources and electric vehicles: A Californian case study," Energy Economics, Elsevier, vol. 102(C).
    11. Abada, I. & Ehrenmann, A. & Lambin, X., 2018. "Unintended consequences: The snowball effect of energy communities," Cambridge Working Papers in Economics 1828, Faculty of Economics, University of Cambridge.
    12. Neetzow, Paul & Mendelevitch, Roman & Siddiqui, Sauleh, 2019. "Modeling coordination between renewables and grid: Policies to mitigate distribution grid constraints using residential PV-battery systems," Energy Policy, Elsevier, vol. 132(C), pages 1017-1033.
    13. Abada, Ibrahim & Ehrenmann, Andreas & Lambin, Xavier, 2020. "Unintended consequences: The snowball effect of energy communities," Energy Policy, Elsevier, vol. 143(C).
    14. Jörn C. Richstein & Seyed Saeed Hosseinioun, 2020. "Industrial Demand Response: How Network Tariffs and Regulation Do (Not) Impact Flexibility Provision in Electricity Markets and Reserves," Discussion Papers of DIW Berlin 1853, DIW Berlin, German Institute for Economic Research.
    15. Jan Stede & Karin Arnold & Christa Dufter & Georg Holtz & Serafin von Roon & Jörn C. Richstein, 2020. "The Role of Aggregators in Facilitating Industrial Demand Response: Evidence from Germany," Discussion Papers of DIW Berlin 1840, DIW Berlin, German Institute for Economic Research.
    16. Richstein, Jörn C. & Hosseinioun, Seyed Saeed, 2020. "Industrial demand response: How network tariffs and regulation (do not) impact flexibility provision in electricity markets and reserves," Applied Energy, Elsevier, vol. 278(C).
    17. Miguel Manuel de Villena & Raphael Fonteneau & Axel Gautier & Damien Ernst, 2019. "Evaluating the Evolution of Distribution Networks under Different Regulatory Frameworks with Multi-Agent Modelling," Energies, MDPI, vol. 12(7), pages 1-15, March.
    18. Rabindra Nepal & Tooraj Jamasb & Anupama Sen & Lawrence Cram, 2017. "Small Systems, Big Targets: Power Sector Reforms and Renewable Energy Development in Small Electricity Systems," Working Papers EPRG 1709, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    19. Richstein, Jörn C. & Hosseinioun, Seyed Saeed, 2020. "Industrial demand response: How network tariffs and regulation (do not) impact flexibility provision in electricity markets and reserves," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics.
    20. Soares, N. & Martins, A.G. & Carvalho, A.L. & Caldeira, C. & Du, C. & Castanheira, É. & Rodrigues, E. & Oliveira, G. & Pereira, G.I. & Bastos, J. & Ferreira, J.P. & Ribeiro, L.A. & Figueiredo, N.C. & , 2018. "The challenging paradigm of interrelated energy systems towards a more sustainable future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 171-193.
    21. Roberts, M.B. & Bruce, A. & MacGill, I., 2019. "Opportunities and barriers for photovoltaics on multi-unit residential buildings: Reviewing the Australian experience," Renewable and Sustainable Energy Reviews, Elsevier, vol. 104(C), pages 95-110.
    22. Nepal, Rabindra & Jamasb, Tooraj & Sen, Anupama, 2018. "Small systems, big targets: Power sector reforms and renewable energy in small systems," Energy Policy, Elsevier, vol. 116(C), pages 19-29.
    23. Sirin, Selahattin Murat & Erten, Ibrahim, 2022. "Price spikes, temporary price caps, and welfare effects of regulatory interventions on wholesale electricity markets," Energy Policy, Elsevier, vol. 163(C).
    24. Schittekatte, Tim & Momber, Ilan & Meeus, Leonardo, 2018. "Future-proof tariff design: Recovering sunk grid costs in a world where consumers are pushing back," Energy Economics, Elsevier, vol. 70(C), pages 484-498.

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    JEL classification:

    • F0 - International Economics - - General

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