Understanding the Coevolution of Electricity Markets and Regulation

39 Pages Posted: 26 Sep 2019

See all articles by Busra Gencer

Busra Gencer

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Erik Larsen

University of Lugano

Ann van Ackere

Université de Lausanne

Date Written: November 28, 2018

Abstract

Electricity markets are complex; they involve long lead-times, include feedbacks that are generally hard to interpret and are influenced by environmental concerns and political objectives. After liberalization, the markets moved from a monopoly situation with a single service provider and captive customers to competitive markets with multiple service providers. Foreseeing the consequences of regulatory decisions is thus becoming increasingly complicated for the regulator. However, understanding these is central to avoid mismatches between the markets and their regulation, which could result in unanticipated and costly long-term consequences.

In this paper we aim to provide a behavioural regulatory framework to help understand how electricity markets and their regulation can successfully coevolve. We identify four stages of market evolution, with their respective regulatory challenges. Next we discuss several behavioural elements that affect electricity markets at the different stages. We then provide examples of regulatory failures at the different market stages, highlighting the role of the behavioural factors. We conclude with a general discussion of how this framework can contribute to addressing the challenges involved in regulating electricity markets.

Keywords: Electricity markets, deregulation, behaviour

Suggested Citation

Gencer, Busra and Larsen, Erik and van Ackere, Ann, Understanding the Coevolution of Electricity Markets and Regulation (November 28, 2018). Available at SSRN: https://ssrn.com/abstract=3455138 or http://dx.doi.org/10.2139/ssrn.3455138

Busra Gencer (Contact Author)

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

Erik Larsen

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, TN Ticino 6900
Switzerland
+41 58 666 4639 (Phone)

Ann Van Ackere

Université de Lausanne ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
+41216970454 (Phone)

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