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Understanding the coevolution of electricity markets and regulation

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  • Busra Gencer, University of Lausanne
  • ,
  • Erik Reimer Larsen
  • Ann van Ackere, University of Lausanne

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.

TidsskriftEnergy Policy
StatusUdgivet - aug. 2020

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