Institutional reform and technological practice: the case of electricity

Abstract

This article proposes a framework for categorizing possible interrelations between technological and institutional change and applies this framework to the case of the restructuring of the electricity sector. It is argued that there is a need for coherence between institutions and technological practice, so as to safeguard the satisfactory functioning of electricity infrastructure. The identification of possible incoherences between institutions and technological practice allows for a better understanding of the potential drivers for change and the evolutionary processes of which they may be part. This article attempts to elaborate the nature of this co-evolution in somewhat more detail, using specific levels of analysis that are exemplified in a four-level model. In the case of the restructuring of the electricity sector, the institutional framework has changed from a public utility-oriented, towards a market-oriented system. However, the technological practice remained unchanged: a system-oriented approach that relies on centralized planning, control and operation. This discrepancy between institutions and technological practice leads to significant frictions in the functioning of the electricity sector, but it also offers opportunities for innovation. In order to make liberalization a success, it might be necessary to stimulate certain technical developments (i.e. distributed generation and intelligent networks).