How to Regulate a Market-Driven Rollout of Smart Meters? A Multi-Sided Market Perspective

Abstract:     
Smart (electricity) meters are regarded as a crucial element to increase energy efficiency by better balancing energy supply and demand. Nevertheless, most countries so far have not seen a comprehensive smart meter rollout. A key economic obstacle to a market-driven rollout is the fragmentation of benefits among multiple stakeholders, which disperses investment incentives. In this article we investigate how to best overcome this investment barrier by analyzing three distinct smart meter market structures. A key parameter for the analysis is the recognition that the smart meter market is multi-sided, making it essential to consider its peculiar characteristics. Our qualitative analysis indicates that a combined smart meter and grid operator, with a regulatory setup that permits the socialization of smart meter investment costs among all electricity consumers, is best suited to implement a market-driven smart meter rollout.

Number of Pages in PDF File: 27

Keywords: multi-sided markets, smart meter, regulation

JEL Classification: L5, L94

working papers series