EDGaR D1

Abstract

The integration of renewable energy into the Dutch energy infrastructure raises interrelated operational and market challenges. In their efforts to address them, engineers and economists approach the design of electricity infrastructures very differently, however. While economists focus on a market design that addresses potential market failures and imperfections, opportunistic behaviour, and social objectives, engineers pay attention to infrastructure assets, a robust network topology, and control system design to handle flows and eventualities. These two logics may be complementary, but may also be at odds. Moreover, it is generally unclear what design choices in one dimension imply for the other. A new and more comprehensive design framework is necessary that bridges the engineering and economic perspectives on energy infrastructure design. This work package develops a comprehensive institutional design (CID) framework for the integration of renewable energy technologies into energy electricity systems and markets. To this end, it elaborates the different design perspectives of engineers and economists regarding energy infrastructures, highlighting the importance of aligning both perspectives, and proposes a framework for a more comprehensive institutional design of complex adaptive socio-technical systems. The resulting framework focuses on aligning the form of infrastructure access of actors, division of responsibilities among actors, and type of coordination between actors in system and market design efforts, given a certain systemic and institutional environment. The research’s main contribution lies in the development of a framework that combines and aligns engineering and economic design possibilities whilst establishing the institutional arrangements for (future) energy systems and markets. This work package hence presents a tool for interested parties to work with; application to cases is left for follow-up research. Once applied to specific cases, practical beneficiaries of the research are policy makers (insights into the institutional arrangements required to optimize performance) and industry (overview of changes in operational responsibilities and business models). It also aids in overseeing the broader institutional implications of technical developments (and vice versa) and stimulates awareness of lock-ins and path-dependencies in this regard.