Innovation in regulated electricity networks: Incentivising tasks with highly uncertain outcomes
| Autor: | Rahmatallah Poudineh, Donna Peng, Seyed Reza Mirnezami |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
business.industry
05 social sciences 0211 other engineering and technologies 02 engineering and technology Management Science and Operations Research General Business Management and Accounting 0502 economics and business 021108 energy Electricity Natural monopoly 050207 economics business Industrial organization Reliability (statistics) |
| Zdroj: | Competition and Regulation in Network Industries. 21:166-192 |
| ISSN: | 2399-2956 1783-5917 |
| DOI: | 10.1177/1783591720906582 |
| Popis: | Traditional regulatory models of natural monopoly network utilities are designed to incentivise cost-efficiency, subject to the firm achieving a certain level of reliability. With the rise of decarbonisation as a key policy goal, facilitating innovation in electricity networks has become of vital importance. Innovation and cost-efficiency may overlap and exhibit the same risk profile. However, we show that when there is a difference in their risk profile, incentivising these two tasks using the same incentive scheme is ineffective. This means incentive regulations need to be enhanced with additional modules that take into account the level of risk to which companies are exposed to for their stage of innovation activity. We also demonstrate that the issue of risk can distort the outcome of a competitive scheme for allocating innovation funds when bidders are heterogeneous in their risk attitude and there is uncertainty about recovering initial investments needed to prepare the project proposal. Thus, competitive schemes need to be designed such that they factor in risk attitude heterogeneity among bidders. |
| Databáze: | OpenAIRE |
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