Governing smart grids: the case for an independent system operator

Nele Friedrichsen ()

European Journal of Law and Economics, 2015, vol. 39, issue 3, 553-572

Abstract: The next years should bring about a rapid transformation of the electricity sector towards high levels of renewable generation and increasing numbers of electric vehicles. Smart grids are seen as the silver bullet responding to the challenge of integrating renewables, managing flexibility, and keeping the costs down in distribution networks. Network unbundling on the other hand is essential for competition in the liberalized electricity industry. It forces independence of the networks and thereby eliminates concern that incumbent integrated (network) firms discriminate against new entrants. With smart grids the unbundling questions become relevant for distribution networks, because active control in smart grids entails discrimination potentials. However, smart grids exhibit coordination needs for efficient system operation and unbundling eliminates firm-internal coordination. Accounting for both aspects, this paper proposes an independent system operator to govern smart distribution grids. It eliminates discrimination incentives and serves coordination needs, thereby striking a balance between both competition and efficiency goals. Copyright Springer Science+Business Media, LLC 2015

Keywords: Smart grid; Unbundling; Governance; Coordination; Independent system operator; L43; L94; D23; L22; L51 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10657-012-9345-0

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