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Smart-grid investments, regulation and organization

  • AGRELL, Per


    (Université catholique de Louvain, CORE and LSM, B-1348 Louvain-la-Neuve, Belgium)

  • BOGETOFT, Peter


    (Copenhagen Business School, Department of Economics, Denmark)

Worldwide, but in particular in North America and Europe, the grid infrastructure managers are facing demands for reinvestments in new assets with higher on-grid and off-grid functionality in order to promote energy efficiency and low-carbon conversion of the energy sector. To meet societal policy objectives in terms of carbon dioxide emissions, both the composition of the generators in favor of distributed energy resources (DER) and the load, promoting integration with downstream energy useage, will change. In this paper, we chararcterize some of the effects of new asset investments policy on the network tasks, assets and costs and contrast this with the assumptions implicit or explicit in current economic network regulation. The resulting challenge is identified as the change in the direction of higher asymmetry of information and higher capital intensity, combined with ambiguities in terms of task separation. To provide guidance, we present a model of investment provision under regulation between a distribution system operator (DSO) and a potential investor-generation. The results from the model confirm the hypothesis that network regulation should find a focal point, should integrate externalities in the performance assessment and should avoid wide delegation of contracting-billing for smart-grid investments.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011072.

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Date of creation: 31 Dec 2011
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Handle: RePEc:cor:louvco:2011072
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