Implications of Smart Grid Innovation for Organizational Models in Electricity Distribution

Forthcoming, Wiley Handbook of Smart Grid Development

25 Pages Posted: 28 Feb 2015 Last revised: 1 Jul 2015

See all articles by L. Lynne Kiesling

L. Lynne Kiesling

Purdue University - Department of Economics

Date Written: February 27, 2015

Abstract

Digital technologies from outside the electricity industry are prompting changes in both regulatory institutions and electric utility business models, leading to the disaggregation or unbundling of historically vertically integrated electricity firms in some jurisdictions and not others, and simultaneously opening the door for competition with the traditional electric utility business. This chapter uses the technological and organizational history of the industry, combined with the transactions cost theory of the firm and of vertical integration, to explore the implications of smart grid technologies for future distribution company business models. Smart grid technologies reduce transactions costs, changing economical firm boundaries and reducing the traditional drivers of vertical integration. Possible business models for the distribution company include an integrated utility, a network manager, or a coordinating platform provider.

Keywords: electricity, utility regulation, deregulation, innovation, technology, organizational economics, institutional economics, platform economics

JEL Classification: D23, L22, L51, L94, O33

Suggested Citation

Kiesling, L. Lynne, Implications of Smart Grid Innovation for Organizational Models in Electricity Distribution (February 27, 2015). Forthcoming, Wiley Handbook of Smart Grid Development. Available at SSRN: https://ssrn.com/abstract=2571251

L. Lynne Kiesling (Contact Author)

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States

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