Analyzing Supply Reliability Incentive in Pricing Regulation of Electricity Distribution Operators

Abstract

In support of the global green transition, numerous policies have been introduced to efficiently address the increasing demand for reliable electricity. However, the impacts of these policies have received limited attention, despite the potential for unsuccessful policy targets to introduce inefficiencies into the energy system, subsequently diminishing societal wealth. This study bridges this research gap by conducting a comprehensive examination of a supply reliability incentive within electricity pricing regulation, aiming to contribute new insights for policy assessments. Analyzing data from all electricity distribution operators within a single jurisdiction, the study investigates the volume and distribution of economic steering to elucidate the overall societal impact. The findings suggest a rewarding system for positive developments in indices, regardless of the absolute interruption index levels, highlighting the importance of precise variable definitions in implementing incentive mechanisms. The assessment tools developed for this study will be valuable for further regulation and policy assessments.