Innovation by Regulation: Smart Electricity Grids in the UK and Italy

Beatriz Couto Ribeiro () and Tooraj Jamasb
Additional contact information
Beatriz Couto Ribeiro: Technical University of Berlin (TUB) and University of Campinas (UNICAMP), https://www.tu.berlin/inno/ueber-uns/team/beatriz-couto-ribeiro

No 7-2024, Working Papers from Copenhagen Business School, Department of Economics

Abstract: With the rise of renewable and distributed energy sources, electricity distribution and transmission utilities are facing increasing demand by regulators to innovate and adopt new technologies and transit to smart grids. However, these regulated natural monopolies often lack economic incentives to develop and adopt new technologies. To overcome this barrier, some regulatory authorities have introduced the so-called "innovation-stimuli" regulations to foster experimentation, technological adoption, and innovative solutions. We analyze and compare the effectiveness of two different innovation-stimuli regulations, the cost-pass through and WACC approaches, in the UK and Italy, respectively. To assess the impact of these different regulations on innovation, we use synthetic control (SC) and synthetic difference-in-differences (SDID) methods, which constitute causal inference techniques for small-n case study design and, for the first time, are employed to assess the impact of regulations on innovation outputs. Our panel data encompasses 13 European countries covering 1995 to 2013 and used smart grid projects and patent applications as dependent variables. Differently from what one might expect, not every innovation-stimuli regulation effectively supports innovation outputs. Meanwhile, cost-pass-through significantly and positively affected patent applications in the UK. In Italy, WACC did not affect patent applications, and European Commission-funded projects mostly drove the increases in smart-grid projects.

Keywords: Innovation; Electricity sector; Regulation (search for similar items in EconPapers)
JEL-codes: K23 O31 Q48 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2024-02-13
New Economics Papers: this item is included in nep-ene, nep-ino, nep-ppm, nep-reg, nep-sbm and nep-tid
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hdl.handle.net/10398/c62e2046-2b9b-4164-9cfa-411a0ef7e350 Full text (application/pdf)
Full text not avaiable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:cbsnow:2024_007

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Copenhagen Business School, Department of Economics Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1.floor, DK-2000 Frederiksberg, Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by CBS Library Research Registration Team ().