Technology and restructuring the electricity market

Abstract

In the process of liberalising the electricity market, hardly a single country has dared to introduce competition in transmission and distribution. Policy makers restrict the market to generation and supply, mainly based on the assumption that competition in transmission is impossible due to natural monopoly characteristics of the network. This paper investigates the options for competition in transmission. New information technology makes it possible to track individual grid use, so the classic 'collective good' argument applied to electricity transmission loses importance. FACTS technologies hold the promise of more efficient grid management by influencing load flows and improving system stability. Finally, miniaturisation of generation systems may lead to decentral power supply, which, at the extreme, results in self-supporting districts not needing a connection to the high voltage grid any more. After a comparison with the evolution of other network infrastructures it is concluded that a new view on the electricity transmission and distribution infrastructure is called for with far-reaching consequences for policy makers and regulators.