Technological Change and the Electric Power Industry: Insights from Telecommunications

Abstract

This paper examines key parallels and differences between the electric utility and telecommunications industries with respect to the role played by new technology, and the particular prospects for electric power distributed resources (DR) in the electric utility industry. Technological change influences industry structure and affects regulatory policy. The paper explores how these dynamics play out in the transition from an industry characterized by vertical integration, natural monopoly, and cost-of-service regulation, to one exhibiting rapidly increasing product/service differentiation, market entry, as well as competition, new technology, and the evaporation of traditional economies of scale. The paper draws from the literature on technological innovation and industry structure, and builds on the premise that the competitive structure and dynamics of an industry reflect underlying product and process technologies.