IDEAS home Printed from https://ideas.repec.org/p/pad/wpaper/0226.html
   My bibliography  Save this paper

Competition and Regulation with Smart Grids

Author

Listed:
  • Marina Bertolini

    (University of Padova)

  • Marco Buso

    (University of Padova)

  • Luciano Greco

    (University of Padova)

Abstract

In the last few decades, liberalization and energy transition have deeply reshaped crucial segments of the electric industry (e.g., power generation, energy trading and retail supply) in several countries around the world posing. The development of smart grids is considered a solution to face the new challenges that arise by such dynamics. Our critical analysis of interdisciplinary literature and governmental documents highlights that input-based or outputbased regulation is not implementable in the case of smart grids because of unclear definition of smart performance. Thus, we introduce a new definition of grid smartness that is based on the volatility of market energy prices and flows and we develop a simple industrial-organization model of the electric market to analyze the impact of smart grids on competition and to assess the incentives of distribution system operators to invest in smart grids. We find that smartgrid investments foster the aggregate supply of energy, though with controversial effects on suppliers’ profits. We also find that the investments in smart grids implemented by the distribution system operators is suboptimal because they fail to internalize positive externalities on energy consumers and producers.

Suggested Citation

  • Marina Bertolini & Marco Buso & Luciano Greco, 2018. "Competition and Regulation with Smart Grids," "Marco Fanno" Working Papers 0226, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0226
    as

    Download full text from publisher

    File URL: https://economia.unipd.it/sites/economia.unipd.it/files/20180226.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bertolini, Marina & D'Alpaos, Chiara & Moretto, Michele, 2018. "Do Smart Grids boost investments in domestic PV plants? Evidence from the Italian electricity market," Energy, Elsevier, vol. 149(C), pages 890-902.
    2. Ropenus, Stephanie & Jensen, Stine Grenaa, 2009. "Support schemes and vertical integration--Who skims the cream?," Energy Policy, Elsevier, vol. 37(3), pages 1104-1115, March.
    3. Lo Schiavo, Luca & Delfanti, Maurizio & Fumagalli, Elena & Olivieri, Valeria, 2013. "Changing the regulation for regulating the change: Innovation-driven regulatory developments for smart grids, smart metering and e-mobility in Italy," Energy Policy, Elsevier, vol. 57(C), pages 506-517.
    4. Hall, Stephen & Foxon, Timothy J., 2014. "Values in the Smart Grid: The co-evolving political economy of smart distribution," Energy Policy, Elsevier, vol. 74(C), pages 600-609.
    5. Personal, Enrique & Guerrero, Juan Ignacio & Garcia, Antonio & Peña, Manuel & Leon, Carlos, 2014. "Key performance indicators: A useful tool to assess Smart Grid goals," Energy, Elsevier, vol. 76(C), pages 976-988.
    6. Cambini, Carlo & Croce, Annalisa & Fumagalli, Elena, 2014. "Output-based incentive regulation in electricity distribution: Evidence from Italy," Energy Economics, Elsevier, vol. 45(C), pages 205-216.
    7. Ruester, Sophia & Schwenen, Sebastian & Batlle, Carlos & Pérez-Arriaga, Ignacio, 2014. "From distribution networks to smart distribution systems: Rethinking the regulation of European electricity DSOs," Utilities Policy, Elsevier, vol. 31(C), pages 229-237.
    8. Buso, Marco & Stenger, Anne, 2018. "Public-private partnerships as a policy response to climate change," Energy Policy, Elsevier, vol. 119(C), pages 487-494.
    9. de Joode, J. & Jansen, J.C. & van der Welle, A.J. & Scheepers, M.J.J., 2009. "Increasing penetration of renewable and distributed electricity generation and the need for different network regulation," Energy Policy, Elsevier, vol. 37(8), pages 2907-2915, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bertolini, Marina & Buso, Marco & Greco, Luciano, 2020. "Competition in smart distribution grids," Energy Policy, Elsevier, vol. 145(C).
    2. 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.
    3. Carlo Cambini & Raffaele Congiu & Golnoush Soroush, 2020. "Regulation, Innovation, and Systems Integration: Evidence from the EU," Energies, MDPI, vol. 13(7), pages 1-18, April.
    4. Bovera, Filippo & Lo Schiavo, Luca, 2022. "From energy communities to sector coupling:a taxonomy for regulatory experimentation in the age of the European Green Deal," Energy Policy, Elsevier, vol. 171(C).
    5. Aurelie Tricoire, 2015. "Uncertainty, vision, and the vitality of the emerging smart grid," Post-Print hal-02351994, HAL.
    6. Cambini, Carlo & Congiu, Raffaele & Jamasb, Tooraj & Llorca, Manuel & Soroush, Golnoush, 2020. "Energy Systems Integration: Implications for public policy," Energy Policy, Elsevier, vol. 143(C).
    7. Carlo Cambini & Elena Fumagalli & Laura Rondi, 2016. "Incentives to quality and investment: evidence from electricity distribution in Italy," Journal of Regulatory Economics, Springer, vol. 49(1), pages 1-32, February.
    8. Guillermo Ivan Pereira & Patrícia Pereira Silva & Deborah Soule, 2018. "Policy-adaptation for a smarter and more sustainable EU electricity distribution industry: a foresight analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 20(1), pages 231-267, December.
    9. Cherrelle Eid & Rudi Hakvoort & Martin de Jong, 2016. "Global trends in the political economy of smart grids: A tailored perspective on 'smart' for grids in transition," WIDER Working Paper Series wp-2016-22, World Institute for Development Economic Research (UNU-WIDER).
    10. Laur, Arnaud & Nieto-Martin, Jesus & Bunn, Derek W. & Vicente-Pastor, Alejandro, 2020. "Optimal procurement of flexibility services within electricity distribution networks," European Journal of Operational Research, Elsevier, vol. 285(1), pages 34-47.
    11. Agostini, Marco & Bertolini, Marina & Coppo, Massimiliano & Fontini, Fulvio, 2021. "The participation of small-scale variable distributed renewable energy sources to the balancing services market," Energy Economics, Elsevier, vol. 97(C).
    12. Cherrelle Eid & Rudi Hakvoort & Martin de Jong, 2016. "Global trends in the political economy of smart grids: A tailored perspective on 'smart' for grids in transition," WIDER Working Paper Series 022, World Institute for Development Economic Research (UNU-WIDER).
    13. Jesse D. Jenkins & Ignacio J. Pérez-Arriaga, 2017. "Improved Regulatory Approaches for the Remuneration of Electricity Distribution Utilities with High Penetrations of Distributed Energy Resources," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    14. Ramos, Ariana & De Jonghe, Cedric & Gómez, Virginia & Belmans, Ronnie, 2016. "Realizing the smart grid's potential: Defining local markets for flexibility," Utilities Policy, Elsevier, vol. 40(C), pages 26-35.
    15. Spiliotis, Konstantinos & Ramos Gutierrez, Ariana Isabel & Belmans, Ronnie, 2016. "Demand flexibility versus physical network expansions in distribution grids," Applied Energy, Elsevier, vol. 182(C), pages 613-624.
    16. Gaspari, Michele & Lorenzoni, Arturo & Frías, Pablo & Reneses, Javier, 2017. "Integrated Energy Services for the industrial sector: an innovative model for sustainable electricity supply," Utilities Policy, Elsevier, vol. 45(C), pages 118-127.
    17. Crispim, João & Braz, José & Castro, Rui & Esteves, Jorge, 2014. "Smart Grids in the EU with smart regulation: Experiences from the UK, Italy and Portugal," Utilities Policy, Elsevier, vol. 31(C), pages 85-93.
    18. Karsten Neuhoff & Sophia Rüster & Sebastian Schwenen, 2015. "Power Market Design beyond 2020: Time to Revisit Key Elements?," Discussion Papers of DIW Berlin 1456, DIW Berlin, German Institute for Economic Research.
    19. Eid, Cherrelle & Codani, Paul & Perez, Yannick & Reneses, Javier & Hakvoort, Rudi, 2016. "Managing electric flexibility from Distributed Energy Resources: A review of incentives for market design," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 237-247.
    20. Yuan, Peng & Pu, Yuran & Liu, Chang, 2021. "Improving electricity supply reliability in China: Cost and incentive regulation," Energy, Elsevier, vol. 237(C).

    More about this item

    Keywords

    Electricity markets; investments; risk aversion; Distribution System Operator;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pad:wpaper:0226. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Raffaele Dei Campielisi (email available below). General contact details of provider: https://edirc.repec.org/data/dspadit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.