IDEAS home Printed from https://ideas.repec.org/a/kap/ejlwec/v39y2015i3p553-572.html
   My bibliography  Save this article

Governing smart grids: the case for an independent system operator

Author

Listed:
  • Nele Friedrichsen

Abstract

The next years should bring about a rapid transformation of the electricity sector towards high levels of renewable generation and increasing numbers of electric vehicles. Smart grids are seen as the silver bullet responding to the challenge of integrating renewables, managing flexibility, and keeping the costs down in distribution networks. Network unbundling on the other hand is essential for competition in the liberalized electricity industry. It forces independence of the networks and thereby eliminates concern that incumbent integrated (network) firms discriminate against new entrants. With smart grids the unbundling questions become relevant for distribution networks, because active control in smart grids entails discrimination potentials. However, smart grids exhibit coordination needs for efficient system operation and unbundling eliminates firm-internal coordination. Accounting for both aspects, this paper proposes an independent system operator to govern smart distribution grids. It eliminates discrimination incentives and serves coordination needs, thereby striking a balance between both competition and efficiency goals. Copyright Springer Science+Business Media, LLC 2015

Suggested Citation

  • Nele Friedrichsen, 2015. "Governing smart grids: the case for an independent system operator," European Journal of Law and Economics, Springer, vol. 39(3), pages 553-572, June.
    • Handle: RePEc:kap:ejlwec:v:39:y:2015:i:3:p:553-572
    DOI: 10.1007/s10657-012-9345-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10657-012-9345-0
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10657-012-9345-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul L. Joskow, 2008. "Lessons Learned From Electricity Market Liberalization," The Energy Journal, , vol. 29(2_suppl), pages 9-42, December.
    2. Künneke, Rolf & Groenewegen, John & Ménard, Claude, 2010. "Aligning modes of organization with technology: Critical transactions in the reform of infrastructures," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 494-505, September.
    3. Brunekreeft, Gert & Neuhoff, Karsten & Newbery, David, 2005. "Electricity transmission: An overview of the current debate," Utilities Policy, Elsevier, vol. 13(2), pages 73-93, June.
    4. Nemoto, Jiro & Goto, Mika, 2004. "Technological externalities and economies of vertical integration in the electric utility industry," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 67-81, January.
    5. D. Balmert & G. Brunekreeft, 2010. "Deep-ISOs and Network Investment," Competition and Regulation in Network Industries, Intersentia, vol. 11(1), pages 27-50, March.
    6. Ramteen Sioshansi, 2012. "OR Forum---Modeling the Impacts of Electricity Tariffs on Plug-In Hybrid Electric Vehicle Charging, Costs, and Emissions," Operations Research, INFORMS, vol. 60(3), pages 506-516, June.
    7. Strbac, Goran, 2008. "Demand side management: Benefits and challenges," Energy Policy, Elsevier, vol. 36(12), pages 4419-4426, December.
    8. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-242, September.
    9. Kaserman, David L & Mayo, John W, 1991. "The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 483-502, September.
    10. Niesten, Eva, 2010. "Network investments and the integration of distributed generation: Regulatory recommendations for the Dutch electricity industry," Energy Policy, Elsevier, vol. 38(8), pages 4355-4362, August.
    11. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    12. repec:bla:jindec:v:49:y:2001:i:3:p:319-33 is not listed on IDEAS
    13. Kwoka, John E., 2002. "Vertical economies in electric power: evidence on integration and its alternatives," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 653-671, May.
    14. T. Randolph Beard & David L. Kaserman & John W. Mayo, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-333, September.
    15. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    16. E. Veldman & D.A.M. Geldtmeijer & J. D. Knigge & H. Slootweg, 2010. "Smart Grids Put into Practice: Technological and Regulatory Aspects," Competition and Regulation in Network Industries, Intersentia, vol. 11(3), pages 287-307, September.
    17. Coll-Mayor, Debora & Paget, Mia & Lightner, Eric, 2007. "Future intelligent power grids: Analysis of the vision in the European Union and the United States," Energy Policy, Elsevier, vol. 35(4), pages 2453-2465, April.
    18. Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2011. "Locational signals to reduce network investments in smart distribution grids: what works and what not?," Bremen Energy Working Papers 0007, Bremen Energy Research.
    19. Brandstätt, Christine & Brunekreeft, Gert & Friedrichsen, Nele, 2011. "Locational signals to reduce network investments in smart distribution grids: What works and what not?," Utilities Policy, Elsevier, vol. 19(4), pages 244-254.
    20. Gert Brunekreeft & Nele Friedrichsen, 2010. "Vertical unbundling, the coordination of investment, and network pricing," Bremen Energy Working Papers 0003, Bremen Energy Research.
    21. Christopher Cook, 2008. "Private Enforcement of EU Competition Law in Member State Courts: Experience to Date and the Path Ahead," CPI Journal, Competition Policy International, vol. 4.
    22. Baldick, Ross & Kahn, Edward, 1993. "Network Costs and the Regulation of Wholesale Competition in Electric Power," Journal of Regulatory Economics, Springer, vol. 5(4), pages 367-384, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marius Buchmann, 2019. "How decentralization drives a change of the institutional framework on the distribution grid level in the electricity sector – the case of local congestion markets," Bremen Energy Working Papers 0031, Bremen Energy Research.
    2. Rebenaque, Olivier & Schmitt, Carlo & Schumann, Klemens & Dronne, Théo & Roques, Fabien, 2023. "Success of local flexibility market implementation: A review of current projects," Utilities Policy, Elsevier, vol. 80(C).
    3. Sajjad Solat & Farrokh Aminifar & Heidarali Shayanfar, 2023. "Changing the regulations for regulating the changes: From distribution system operator (DSO) to electricity distribution stakeholders’ organization (EDSO)," Energy & Environment, , vol. 34(4), pages 830-854, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nele Friedrichsen, 2011. "Governing Smart Grids - the Case for an Independent System Operator," Bremen Energy Working Papers 0011, Bremen Energy Research.
    2. Roland Meyer, 2012. "Vertical Economies and the Costs of Separating Electricity Supply--A Review of Theoretical and Empirical Literature," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    3. Gugler, Klaus & Liebensteiner, Mario & Schmitt, Stephan, 2017. "Vertical disintegration in the European electricity sector: Empirical evidence on lost synergies," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 450-478.
    4. Growitsch, Christian & Müller, Gernot & Stronzik, Marcus, 2008. "Ownership Unbundling in der Gaswirtschaft: Theoretische Grundlagen und empirische Evidenz," WIK Discussion Papers 308, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    5. Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2011. "Improving Investment Coordination in Electricity Networks Through Smart Contracts," Bremen Energy Working Papers 0010, Bremen Energy Research.
    6. Gert Brunekreeft & Dierk Bauknecht & Martin Palovic & Anna Pechan & Franziska Flachsbarth & Matthias Koch, 2024. "Policy measures to apply the Whole System Approach (WSA) in energy infrastructures," Bremen Energy Working Papers 0047, Bremen Energy Research.
    7. Palovic, Martin, 2022. "Administrative congestion management meets electricity network regulation: Aligning incentives between the renewable generators and network operator," Utilities Policy, Elsevier, vol. 79(C).
    8. Felix Höffler & Sebastian Kranz, 2011. "Imperfect legal unbundling of monopolistic bottlenecks," Journal of Regulatory Economics, Springer, vol. 39(3), pages 273-292, June.
    9. Simshauser, P., 2020. "Merchant utilities and boundaries of the firm: vertical integration in energy-only markets," Cambridge Working Papers in Economics 2039, Faculty of Economics, University of Cambridge.
    10. Felten, Björn & Weber, Christoph, 2018. "The value(s) of flexible heat pumps – Assessment of technical and economic conditions," Applied Energy, Elsevier, vol. 228(C), pages 1292-1319.
    11. Katrin Schmitz & Christoph Weber, 2013. "Does One Design Fit All? On The Transferability Of The PJM Market Design To The German Electricity Market," EWL Working Papers 1302, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Apr 2013.
    12. Néstor Duch, 2005. "Vertical linkages, agglomeration and the organization of production in European regions," Working Papers 2005/6, Institut d'Economia de Barcelona (IEB).
    13. Asantewaa, Adwoa & Jamasb, Tooraj & Llorca, Manuel, 2022. "Reforming Small Electricity Systems: Market Design and Competition," Working Papers 12-2022, Copenhagen Business School, Department of Economics.
    14. Brennan, Timothy J., 2005. "Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?," Discussion Papers 10723, Resources for the Future.
    15. Höffler, Felix & Kranz, Sebastian, 2007. "Legal Unbundling can be a Golden Mean between Vertical Integration and Separation," Bonn Econ Discussion Papers 15/2007, University of Bonn, Bonn Graduate School of Economics (BGSE).
    16. Simshauser, Paul & Tian, Yuan & Whish-Wilson, Patrick, 2015. "Vertical integration in energy-only electricity markets," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 35-56.
    17. John Kwoka & Michael Pollitt & Sanem Sergici, 2010. "Divestiture policy and operating efficiency in U.S. electric power distribution," Journal of Regulatory Economics, Springer, vol. 38(1), pages 86-109, August.
    18. Takuya Urakami, 2007. "Economies of vertical integration in the Japanese water supply industry," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 27(2), pages 129-141, August.
    19. Gert Brunekreeft & Mika Goto & Roland Meyer & Masahiro Maruyama & Toru Hattori, 2014. "Unbundling of Electricity Transmission System Operators in Germany – An Experience Report," Bremen Energy Working Papers 0016, Bremen Energy Research.
    20. Eva Niesten & Albert Jolink, 2014. "Absence of a market in the Dutch balancing mechanism: European rules versus specific investments," European Journal of Law and Economics, Springer, vol. 38(1), pages 71-90, August.

    More about this item

    Keywords

    Smart grid; Unbundling; Governance; Coordination; Independent system operator; L43; L94; D23; L22; L51;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:ejlwec:v:39:y:2015:i:3:p:553-572. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.