Carnegie Mellon Electricity Industry Center

2006-07 Seminars

The regulation of critical technical functions in infrastructures

Dr. R.W. Künneke
TU Delft

Abstract
The ongoing liberalization of the electricity sector is generally perceived as an issue of an institutional restructuring of this sector, including privatization of essential facilities and re-regulation in order to allow for more competition and less governmental involvement. However, it becomes increasingly evident, that liberalization has a very distinctive influence on the technical functioning of this industry. The well-known California energy crisis illustrated, among others, that strategic behavior of market parties and ill incentives can result in a partial technical collapse of the electricity system. Institutional restructuring needs to take into account the technical specificities and coordination needs of this industry. The technical functioning of the electricity sector needs to be supported by suitable institutional arrangements. It will be argued that there is a need for coherence between the technical and institutional coordination of this infrastructure.

Against this background the paper focuses on critical technical control mechanisms that are essential to guaranty the satisfactory technical functioning of the electricity infrastructure. These critical technical control mechanisms are subsequently related to different institutional arrangements that could effectively and efficiently support them. This approach is summarized by the following problem statement:

What are critical technical control mechanisms in the electricity system and how are they related to critical transactions that support the technical functioning of the system?

Based on this analysis it will be possible to pinpoint to specific mismatches between technological requirements and their supporting institutional arrangements. This contributes to a better understanding of the technological and institutional functions that are needed to support liberalized energy markets.