Using the IAD Framework to Model the Political Economy of Technological Change in a Regulated Industry: The Case of Transactive Energy
Abstract
The substantial technological change taking place in the electricity industry differs qualitatively from the past century’s technology history – decentralized, decarbonized, and digital – and policy objectives facing regulators have expanded to prioritize decarbonization. But electricity industry and regulators have a pacing problem, with rates of technological change far outstripping the slow pace of institutional change. The institutional challenges of implementing such changes in a rate-of-return regulated industry are formidable because these new technologies are so different in their features, capabilities, and system implications. This paper uses the Ostrom Workshop Institutional Analysis and Development (IAD) framework to conduct a mapping exercise of utility regulation in the presence of a technology shock. The mapping exercise constructs a conceptual “ideal type” stylized model of the 20th century combination of large-scale electro-mechanical technologies with public utility rate-of-return regulation, with the IAD framework as the structure of the model, and then compares that combination with a stylized model representing the DER and digital technologies and their capabilities. The stylized “technology shock” model is based on transactive energy, which connects energy devices to a local energy market, enables them to submit bids based on owner preferences, and automates device settings in response to market prices to enable decentralized coordination of supply and demand.