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Lessons from the history of independent system operators in the energy sector

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  • Pollitt, Michael G.

Abstract

This paper examines the choice, in electricity and gas systems, between having an independent system operator (ISO) and an independent transmission system operator (ITSO). Both optimise the operation of the system in real time. However ISOs do not own any electricity transmission wires or gas transmission pipes (i.e. electricity and gas systems), while ITSOs do. To examine the choice we will discuss the functions, cost structure, governance and pricing of the ISO, focussing on the US, with regard to controlling the system and operating associated power markets. We outline an ideal model for an electricity system operator and examine the extent to which system operation in the US and the UK conforms to the ideal. Finally, we look at the evolving role of system operators and how their efficiency might be evaluated. We conclude that there is much to learn from ISO experience in operating existing transmission systems.

Suggested Citation

  • Pollitt, Michael G., 2012. "Lessons from the history of independent system operators in the energy sector," Energy Policy, Elsevier, vol. 47(C), pages 32-48.
  • Handle: RePEc:eee:enepol:v:47:y:2012:i:c:p:32-48
    DOI: 10.1016/j.enpol.2012.04.007
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    Cited by:

    1. repec:oup:oxford:v:33:y:2017:i:suppl_1:p:s134-s143. is not listed on IDEAS
    2. Arina Nikandrova & Jevgenijs Steinbuks, 2017. "Contracting for the second best in dysfunctional electricity markets," Journal of Regulatory Economics, Springer, vol. 51(1), pages 41-71, February.
    3. repec:aen:journl:ej38-3-stengos is not listed on IDEAS
    4. J-M- Glachant & H. Khalfallah & Y. Perez & V. Rious & M. Saguan, 2013. "Implementing Incentive Regulation and Regulatory Alignment with Resource Bounded Regulators," Competition and Regulation in Network Industries, Intersentia, vol. 14(3), pages 265-291, September.
    5. Khan, Muhammad T. & Thopil, George Alex & Lalk, Jorg, 2016. "Review of proposals for practical power sector restructuring and reforms in a dynamic electricity supply industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 326-335.
    6. Nepal, Rabindra & Jamasb, Tooraj, 2015. "Caught between theory and practice: Government, market, and regulatory failure in electricity sector reforms," Economic Analysis and Policy, Elsevier, vol. 46(C), pages 16-24.
    7. Rabindra, Nepal & Tooraj, Jamasb, 2013. "Caught Between Theory and Practice: Government, Market, and Regulatory Failure in Electricity Sector Reforms," SIRE Discussion Papers 2013-22, Scottish Institute for Research in Economics (SIRE).
    8. Oseni, Musiliu O. & Pollitt, Michael G., 2014. "Institutional arrangements for the promotion of regional integration of electricity markets : international experience," Policy Research Working Paper Series 6947, The World Bank.
    9. repec:eee:enepol:v:113:y:2018:i:c:p:376-385 is not listed on IDEAS
    10. Michael G. Pollitt, 2017. "The economic consequences of Brexit: energy," Oxford Review of Economic Policy, Oxford University Press, vol. 33(suppl_1), pages 134-143.
    11. Danias, Nikolaos & Kim Swales, John & McGregor, Peter, 2013. "The Greek Electricity Market Reforms: Political and Regulatory Considerations," Energy Policy, Elsevier, vol. 62(C), pages 1040-1047.
    12. Strbac, Goran & Pollitt, Michael & Konstantinidis, Christos Vasilakos & Konstantelos, Ioannis & Moreno, Rodrigo & Newbery, David & Green, Richard, 2014. "Electricity transmission arrangements in Great Britain: Time for change?," Energy Policy, Elsevier, vol. 73(C), pages 298-311.
    13. Ibarra-Yunez, Alejandro, 2015. "Energy reform in Mexico: Imperfect unbundling in the electricity sector," Utilities Policy, Elsevier, vol. 35(C), pages 19-27.
    14. Jon Stern, 2015. "Past And Potential Roles Of Electricity System Operators: From Liberalisation To Climate Change Management In Britain," Cambridge Working Papers in Economics 1507, Faculty of Economics, University of Cambridge.
    15. Haney, Aoife Brophy & Pollitt, Michael G., 2013. "International benchmarking of electricity transmission by regulators: A contrast between theory and practice?," Energy Policy, Elsevier, vol. 62(C), pages 267-281.
    16. Lion Hirth & Inka Ziegenhagen, 2013. "Control Power and Variable Renewables A Glimpse at German Data," Working Papers 2013.46, Fondazione Eni Enrico Mattei.
    17. Claire Bergaentzlé, 2012. "Particularités d'adoption des compteurs intelligents au Royaume-Uni et en Allemagne : entre marchés de comptage libéralisé et règles à mettre en place pour un réel smart grid intégré," Post-Print halshs-00793322, HAL.
    18. Jean-Michel Glachant & Haikel Khalfallah & Yannick Perez & Vincent Rious & Marcelo Saguan, 2013. "Implementing incentive regulation through an alignment with resource bounded regulators," Post-Print halshs-00767872, HAL.

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