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The “Smart Paradox”: Stimulate the deployment of smart grids with effective regulatory instruments

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  • Marques, Vítor
  • Bento, Nuno
  • Costa, Paulo Moisés

Abstract

The concept of SG (Smart Grids) encompasses a set of technologies that raise the intelligence of the electrical networks, such as smart meters or instruments of communication, sensing and auto-correction of networks. Nevertheless, the cost is still an important obstacle for the transformation of the current electricity system into a smarter one. Regulation can have an important role in setting up a favorable framework that fosters investments. However, the novelty with SG is the disembodied character of the technology, which may change the incentives of the regulated network companies to invest, affecting the effectiveness of the regulatory instruments (“cost plus” or “price cap”). This paper demonstrates that the solution to this “Smart” paradox requires strong incentive regulation mechanisms able to stimulate the adoption of SG technologies. Moreover, the regulation should not jeopardize conventional investments that are unable to be substituted by SG. Thus, a combination of performance regulation and efficiency obligations may be necessary.

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  • Marques, Vítor & Bento, Nuno & Costa, Paulo Moisés, 2014. "The “Smart Paradox”: Stimulate the deployment of smart grids with effective regulatory instruments," Energy, Elsevier, vol. 69(C), pages 96-103.
    • Handle: RePEc:eee:energy:v:69:y:2014:i:c:p:96-103
    DOI: 10.1016/j.energy.2014.01.007
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    3. Knezović, Katarina & Marinelli, Mattia & Zecchino, Antonio & Andersen, Peter Bach & Traeholt, Chresten, 2017. "Supporting involvement of electric vehicles in distribution grids: Lowering the barriers for a proactive integration," Energy, Elsevier, vol. 134(C), pages 458-468.
    4. Tuballa, Maria Lorena & Abundo, Michael Lochinvar, 2016. "A review of the development of Smart Grid technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 710-725.
    5. Perri, Cecilia & Giglio, Carlo & Corvello, Vincenzo, 2020. "Smart users for smart technologies: Investigating the intention to adopt smart energy consumption behaviors," Technological Forecasting and Social Change, Elsevier, vol. 155(C).
    6. Marques, Vítor & Costa, Paulo Moisés & Bento, Nuno, 2022. "Greater than the sum: On regulating innovation in electricity distribution networks with externalities," Utilities Policy, Elsevier, vol. 79(C).
    7. Vitor Miguel Ribeiro, 2014. "Long-term regulatory orientation and the ideal timing of quality investment," FEP Working Papers 552, Universidade do Porto, Faculdade de Economia do Porto.
    8. Ribeiro, Beatriz Couto & Ferrero, Luciane Graziele Pereira & Bin, Adriana & Blind, Knut, 2023. "Effects of innovation stimuli regulation in the electricity sector: A quantitative study on European countries," Energy Economics, Elsevier, vol. 118(C).
    9. Soares, N. & Martins, A.G. & Carvalho, A.L. & Caldeira, C. & Du, C. & Castanheira, É. & Rodrigues, E. & Oliveira, G. & Pereira, G.I. & Bastos, J. & Ferreira, J.P. & Ribeiro, L.A. & Figueiredo, N.C. & , 2018. "The challenging paradigm of interrelated energy systems towards a more sustainable future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 171-193.
    10. Paulo Moisés Costa & Nuno Bento & Vítor Marques, 2014. "Dealing with Technological Risk in a Regulatory Context: The Case of Smart Grids," GEMF Working Papers 2014-11, GEMF, Faculty of Economics, University of Coimbra.

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