IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

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

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.

Download Executive Summary Purchase ( $25 )

Energy Specializations: Energy Investment and Finance – Corporate Strategy; Energy Investment and Finance – Other; Electricity – Local Distribution; Electricity – Generation Technologies; Electricity – Distributed Generation; Electricity – Transmission and Network Management

JEL Codes: Q41: Energy: Demand and Supply; Prices, G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity, Q54: Climate; Natural Disasters and Their Management; Global Warming, L51: Economics of Regulation, L98: Industry Studies: Utilities and Transportation: Government Policy, Q40: Energy: General

Keywords: Incentive regulation, Infrastructure, Investment, Smart grids

DOI: 10.5547/01956574.38.2.pcos

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 38, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy