Innovation and Regulation in the Electricity Supply Industry

Many countries have started to liberalize market access to the electricity supply sector. The reform of the regulatory framework for utilities can – although primarily focused on fostering competition – play an important role for technology and environmental policy. Recent liberalization experience in the U.K. suggests that wider social and economic objectives can be achieved through appropriate regulatory intervention. New instruments such as the Energy Efficiency Standards of Performance (EESOPs) and the Non-Fossil Fuel Obligation (NFFO) can support environmental and innovation policy objectives. The British experience suggests that design and continuous re-design of regulatory tools is necessary to improve the efficiency of the regulatory framework; it also indicates that regulatory interventions need not bring about substantial market distortions. Danish energy policy has been promoting technological and institutional innovations over the last two decades. The most striking results have been achieved in the field of wind power, where Danish companies have gained a substantial share of the world market.