Innovation in regulated electricity networks: Incentivising tasks with highly uncertain outcomes

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.

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An assessment of the tools of incentive regulation in electricity networks

ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT ◽

10.3280/efe2012-001008 ◽

2012 ◽

pp. 121-152

Author(s):

Haikel Khalfallah ◽

Jean-Michel Glachant

Keyword(s):

Smart Grid ◽

Cost Efficiency ◽

Energy Systems ◽

Active Role ◽

Incentive Regulation ◽

Efficient Manner ◽

Electricity Networks ◽

Regulatory Aspects ◽

Key Features

Network regulation is playing an active role in a context of restructuring energy systems for long term transition to a smart grid. Regulation of network companies' activities should consider both cost efficiency objectives and other objectives such as quality and network innovation. It is in this context that incentive regulation tools are discussed and assessed in this paper. The aim is to show their key features and how they could be aligned with the main regulation goals. This paper concludes that they should be considered as complementary tools to address conflicting regulatory aspects in an efficient manner.

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A Novel Incentive Mechanism with Government Subsidy for the Key Technologies R&D of New Energy Automobile Industry

Mathematical Problems in Engineering ◽

10.1155/2021/1041291 ◽

2021 ◽

Vol 2021 ◽

pp. 1-15

Author(s):

Ru He ◽

Chui-Yong Zheng ◽

Huan-Huan Zhao

Keyword(s):

Automobile Industry ◽

Minimum Cost ◽

Risk Attitude ◽

Innovation Activity ◽

Consensus Method ◽

Government Subsidy ◽

Key Technology ◽

Key Technologies ◽

New Energy ◽

Set Up

The key technology research and development (R&D) of new energy automobile industry is a collaborative innovation activity of multi-innovation subjects, and how to set up effective incentive mechanisms and safeguards to stimulate innovative subjects and urge them to invest in corresponding efforts is crucial to ensure the success of key technologies R&D in the new energy automobile industry. To solve the incentive problem of key technology R&D of new energy automobile industry, considering government subsidy and the risk attitude of government and innovation subject, from the perspective of stakeholder negotiation and system coordination, introduce the minimum-cost consensus method into grey target decision-making and set constraint conditions to ensure a stable and effective incentive method. Then use a case to verify the effectiveness and rationality of the proposed model.

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