Monday, February 25, 2019

Competition and Regulation with Smart Grids

Marina Bertolini (University of Padova); Marco Buso (University of Padova); Luciano Greco (University of Padova) discuss Competition and Regulation with Smart Grids.

Abstract: In the last few decades, liberalization and energy transition have deeply reshaped crucial segments of the electric industry (e.g., power generation, energy trading and retail supply) in several countries around the world posing. The development of smart grids is considered a solution to face the new challenges that arise by such dynamics. Our critical analysis of interdisciplinary literature and governmental documents highlights that input-based or outputbased regulation is not implementable in the case of smart grids because of unclear deï¬ nition of smart performance. Thus, we introduce a new deï¬ nition of grid smartness that is based on the volatility of market energy prices and flows and we develop a simple industrial-organization model of the electric market to analyze the impact of smart grids on competition and to assess the incentives of distribution system operators to invest in smart grids. We ï¬ nd that smartgrid investments foster the aggregate supply of energy, though with controversial effects on suppliers’ proï¬ ts. We also ï¬ nd that the investments in smart grids implemented by the distribution system operators is suboptimal because they fail to internalize positive externalities on energy consumers and producers. URL:

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