Energy Network Innovation in the EU: A Tripartite Evolutionary Game Approach

Anna Gade Christiansen (), Manuel Llorca, Tooraj Jamasb and Tian Zhao
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Anna Gade Christiansen: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Tian Zhao: School of Economics and Management, Beihang University, China

No 11-2024, Working Papers from Copenhagen Business School, Department of Economics

Abstract: This paper investigates how energy networks in the European Union can be encouraged to increase innovation to reach the decarbonisation goals. We design and analyse a tripar-tite evolutionary game model with the European Commission, national energy regulators, and energy network companies being the groups of players in the game. We find that the only evolutionary stable state of the game is where the three groups of players choose cooperation strategies. For the Commission and the national regulatory authorities, induc-ing innovation involves adopting new policy and regulatory mechanisms, respectively. For the energy networks, it involves investing in innovation with decarbonisation goals. We assume that the initial probability of the Commission choosing its cooperation strategy is relatively high and the initial probabilities of the regulators and the energy networks choosing cooperation strategies is relatively low. Numerical simulations suggest that the convergence rate to the evolutionary stable state can be increased if the Commission in-creases the probability of energy networks receiving external funding and penalty im-posed on regulators to adapt their incentive mechanisms to induce innovation. The Com-mission clearly plays a key role in reaching the stable state.

Keywords: Energy networks; innovation; regulation; green transition; tripartite evolutionary game (search for similar items in EconPapers)
JEL-codes: C70 L50 L90 O30 Q40 Q50 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2024-06-24
New Economics Papers: this item is included in nep-eec, nep-ene, nep-evo, nep-gth, nep-ino and nep-sbm
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