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The Future of Electricity (and Gas) Regulation in a Low-carbon Policy World

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  • Michael G. Pollitt

Abstract

This paper discusses whether a new paradigm is necessary for independent economic regulation of electricity (and closely associated natural gas) systems. We begin by summarizing the nature of the traditional model of electricity reform and the place of economic regulation within it. Next we outline the drivers for changing the current model of electricity regulation, namely, the maturity of the existing model, the reality of changing circumstances, and the coming of age of climate change concern. We go on to discuss the premises on which a new model of regulation should be based. These are: remembering the successes of the current system of regulation; a new focus on processes not just outcomes; a recognition of the economics of climate change; and the appropriate management of uncertainty. We then highlight the key elements of a new model for regulation: new processes of regulation; new models of competition and the issues raised by a focus on climate change. The paper draws heavily on the experience of the UK, but has direct implications for the rest of the European Union countries and for other countries whose regulatory systems mirror them.

Suggested Citation

  • Michael G. Pollitt, 2008. "The Future of Electricity (and Gas) Regulation in a Low-carbon Policy World," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 63-94.
    • Handle: RePEc:aen:journl:dn-se-a05
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    Cited by:

    1. Peter Broer & Gijsbert Zwart, 2013. "Optimal regulation of lumpy investments," Journal of Regulatory Economics, Springer, vol. 44(2), pages 177-196, October.
    2. Bohne, Eberhard, 2011. "Conflicts between national regulatory cultures and EU energy regulations," Utilities Policy, Elsevier, vol. 19(4), pages 255-269.
    3. Nele Friedrichsen & Christine Brandstätt & Gert Brunekreeft, 2014. "The need for more flexibility in the regulation of smart grids – stakeholder involvement," International Economics and Economic Policy, Springer, vol. 11(1), pages 261-275, February.
    4. Haney, Aoife Brophy & Pollitt, Michael G., 2009. "Efficiency analysis of energy networks: An international survey of regulators," Energy Policy, Elsevier, vol. 37(12), pages 5814-5830, December.
    5. Pollitt, M. & Dale, L., 2018. "Restructuring the Chinese Electricity Supply Sector - How industrial electricity prices are determined in a liberalized power market: lessons from Great Britain," Cambridge Working Papers in Economics 1871, Faculty of Economics, University of Cambridge.
    6. de Sépibus, Joëlle, 2013. "The Integration of Electricity from Renewable Energy Sources in the European Union Electricity Market – The case for “Smart Grids”," Papers 621, World Trade Institute.
    7. Jamasb, Tooraj & Pollitt, Michael, 2008. "Security of supply and regulation of energy networks," Energy Policy, Elsevier, vol. 36(12), pages 4584-4589, December.
    8. Pollitt, Michael, 2010. "Does electricity (and heat) network regulation have anything to learn from fixed line telecoms regulation?," Energy Policy, Elsevier, vol. 38(3), pages 1360-1371, March.
    9. Clastres, Cédric, 2011. "Smart grids: Another step towards competition, energy security and climate change objectives," Energy Policy, Elsevier, vol. 39(9), pages 5399-5408, September.
    10. Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2013. "The Need for More Flexibility in the Regulation of Smart Grids – Stakeholder Involvement," Bremen Energy Working Papers 0013, Bremen Energy Research.
    11. Christian von Hirschhausen, 2011. "Infrastruktur für die Energiewende und die Systemtransformation – notwendig, aber kein Engpass für weitere Schritte," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(18), pages 14-20, October.
    12. Agrell, Per J. & Bogetoft, Peter & Mikkers, Misja, 2013. "Smart-grid investments, regulation and organization," Energy Policy, Elsevier, vol. 52(C), pages 656-666.
    13. Manfren, Massimiliano & Caputo, Paola & Costa, Gaia, 2011. "Paradigm shift in urban energy systems through distributed generation: Methods and models," Applied Energy, Elsevier, vol. 88(4), pages 1032-1048, April.
    14. Richard Green, 2010. "Energy Regulation in a Low Carbon World," Discussion Papers 10-16, Department of Economics, University of Birmingham.
    15. Glachant, Jean-Michel & Ruester, Sophia, 2014. "The EU internal electricity market: Done forever?," Utilities Policy, Elsevier, vol. 31(C), pages 221-228.
    16. Andrei Covatariu & Daniel Duma & Monica Giulietti & Michael G. Pollitt, 2023. "Toward an operational definition and a methodology for measurement of the active DSO (distribution system operator) for electricity and gas," Working Papers EPRG2315, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    17. Robert Hahn & Robert Metcalfe & Florian Rundhammer, 2020. "Promoting customer engagement: A new trend in utility regulation," Regulation & Governance, John Wiley & Sons, vol. 14(1), pages 121-149, January.
    18. Torriti, Jacopo, 2012. "Demand Side Management for the European Supergrid: Occupancy variances of European single-person households," Energy Policy, Elsevier, vol. 44(C), pages 199-206.
    19. Cédric Clastres, 2010. "Les réseaux intelligents : régulation, investissement et gestion de la demande électrique," Post-Print halshs-00539818, HAL.
    20. Barbosa, Ailson de Souza & Shayani, Rafael Amaral & Oliveira, Marco Aurélio Gonçalves de, 2018. "A multi-criteria decision analysis method for regulatory evaluation of electricity distribution service quality," Utilities Policy, Elsevier, vol. 53(C), pages 38-48.
    21. Cédric Clastres, 2011. "Smart grids : Another step towards competition, energy security and climate change objectives," Post-Print halshs-00617702, HAL.
    22. Sharabaroff, Alexander & Boyd, Roy & Chimeli, Ariaster, 2009. "The environmental and efficiency effects of restructuring on the electric power sector in the United States: An empirical analysis," Energy Policy, Elsevier, vol. 37(11), pages 4884-4893, November.
    23. Duma, Daniel & Pollitt, Michael G. & Covatariu, Andrei & Giulietti, Monica, 2024. "Defining and measuring active distribution system operators for the electricity and natural gas sectors," Utilities Policy, Elsevier, vol. 87(C).

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    JEL classification:

    • F0 - International Economics - - General

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