Report
October 1, 2018
Incentive Mechanisms in Regulation of Electricity Distribution: Innovation and Evolving Business Models
Prepared for Electricity Networks Association New Zealand
Utilities, regulators and policy-makers around the world are revisiting the scope and role of utilities as players in the energy industry, driven in large part by advances in technologies and new societal goals. The current environment that electricity distribution businesses find themselves in is different from that when liberalization and industry restructuring took place. This is primarily due to the following factors:
- The development and availability of cost competitive energy options, beyond traditional large, centrally dispatched generating units. These include non-hydro renewables, as well as more distributed energy resources (DERs). As a result, increasing quantities of generation is connecting to the distribution network.
- Serious consideration is being given to the electrification of transport and space and water heating. Such “beneficial electrification” will almost certainly have a sizable impact on electric loads and infrastructure requirements.
- The deployment of digital communications, which is changing the way consumers can connect with suppliers and interact among each other. Advances in sensing, analytics and controls are changing the way customers and electricity distribution businesses can respond to peak events.
- Consumer behaviour and attitudes towards environment and climate issues, and growing interest in participating more actively in energy markets.
- The growing presence of non-utility innovators, including technology companies.