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Distributed energy infrastructure paradigm: Community microgrids in a new institutional economics context

Emi Minghui Gui, Mark Diesendorf and Iain MacGill

Renewable and Sustainable Energy Reviews, 2017, vol. 72, issue C, 1355-1365

Abstract: This paper provides a theoretical framework, based on New Institutional Economics (NIE) concepts, to guide the development of community microgrids. Given limited application thus far of such energy systems, this paper also draws on empirical studies and experiences from the planning and development of other public/community infrastructure and utility services in the development of this framework. It links an efficient ownership and governance structure with transactional characteristics such as asset idiosyncrasy, frequency, and uncertainty (defined in Section 3.1). The key role of the customers and the microgrid service provider, and more specifically their ‘bilateral monopoly’ relationship and its effects on the choice of institutional structure, is highlighted. The paper examines the optimum conditions for public, private or hybrid financial ownership, and for unified or network governance through long-term contracting. This allows ex-ante investment uncertainty and ex-post appropriation risks to be efficiently managed. The analysis suggests that long-term contract completeness, future demand for electricity and level of uncertainty are the determining factors in the selection of institutional structure. This has significant real-world implications for the communities seeking to achieve electricity self-sufficiency and environmental benefits through community microgrids, service providers and other private or public actors.

Keywords: Microgrid; Community energy system; Institutional structure; Ownership and governance; New Institutional Economics (search for similar items in EconPapers)
Date: 2017
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