Changes in the electricity supply industry are dramatic. The liberalization of the electricity sector in 1997 exposed generation and retail to market entry and competition. However, especially in generation, non-incumbent market players were the exception, while a dominant market position of the formerly monopolistic incumbents remained the rule. With the energy transition (the German "Energiewende") starting in 2000 this situation started to change significantly. The large-scale integration of renewable energy supply (RES) has triggered decentralization of generation and market entry of new players ("third parties") and has fundamentally changed the supply structure of the electricity sector. Temporary excess capacity and increasing diversity of ownership has intensified price competition.Why is all this important and what are the policy consequences? Firstly and most prominently, the emergence of third parties changes the business strategies and the competitive environment in the sector. Secondly, the changing competitive environment has consequences for competition policy and monopoly regulation. The notion of traditional market power in power markets is fading quickly. If anything, companies are struggling to survive; abuse of market power is not much of an issue currently. In fact, we would expect a new wave of consolidation. Moreover, the monopoly element of the network seems to erode slowly or at least change, raising two important questions. On the one hand, selectively, the need for regulation phases out. Bypassing of the network by self-sufficiency, facilitated by PV and micro-storage provides an example. On the other hand, as sectors start to converge, regulatory frameworks of these sectors, which largely developed independently, should be aligned more closely. Thirdly, coordination of network and system development gets more complicated with a multitude of different players with widely differing interests. To achieve efficient network development, the governance systems need to align incentives. As the electricity supply changes from a top-down, single-firm game, into a bottom-up, multiple-player system we need novel governance systems to deal with this change.
The electricity supply chain is changing due to the integration of renewable energies. Two developments are in the focus of this paper: First, the emergence of third parties and second, the requirement for information management (i.e. the management of data exchange from smart metering) as a new step in the supply chain. Information management needs to secure the neutral and non-discriminatory integration of third parties into smart grids. This can be accomplished by a collaborative governance approach. Based on veto player theory we identify two key issues for the voting process within a collaborative governance approach for information management. First, we show that a voting process based on “individual veto players” will result in governance lock-in situations, where governance innovation will be impeded. Second, we discuss that “collective veto players” can secure governance innovation for information management, but that the non-discriminatory integration for third parties might be at stake, if less than a qualified majority is required to vote on a veto.
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