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Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behaviour. Effective economic regulation of the electricity networks has become a key target in most developed economies after the 1980s. In Norway, incentive regulation and efficiency benchmarking were introduced in 1997. In Norway, the electricity grid is divided into three levels, namely, central, regional and distribution networks. In this paper, we study two overlooked aspects when analysing the performance of electricity networks: vertical integration and ownership structure. We use a stochastic frontier analysis approach to analyse the performance of Norwegian electricity distribution utilities for the period 2007–2014. We observe that vertical integration between distribution and regional transmission implies higher cost inefficiencies. This indicates that the efficiency gains due to separate management of the networks exceed the economies of coordination from vertical economies of scope. In addition, we find that council ownership entails higher efficiencies. This could be explained by the state having an interest in high-voltage electricity networks, rather than low-voltage ones, and the decentralised model from which the now centralised system was once developed.

The electricity sector is undergoing a remarkable change, supporting the overall transition required to meet policy objectives of lower carbon emissions as well as a safe and secure supply of electricity in a cost-effective manner for consumers. Electricity networks are part of the infrastructure vital to a functioning modern economy. This thesis considers specific elements of ongoing developments related to electricity networks, namely the changes in the economic regulation of networks and the new role for consumer. Achieving environmental and climate change policy targets is reliant on electricity networks adapting to changes and embracing an increased role in the electricity supply chain. The need for sensitivity to social justice and the preferences of electricity end-consumers is relatively new to network owners but is becoming increasingly important. Four main chapters, employing both theoretical and empirical economic methods, quantitative and qualitative, explore and advance aspects of incentive regulation and, particularly, the role of consumers.

Ambitious renewable energy targets and an aging infrastructure necessitate a substantial upgrading and expansion of the electricity networks around Europe and beyond. Although vital for the functioning of the economy and a green energy future, grid development projects are often met by public opposition, which increase costs and lead to lengthy planning processes. Therefore, understanding the social aspects of a green energy economy is becoming increasingly important. The current planning frameworks have proven ineffective at resolving conflicts among stakeholders, indicating the need for a new approach. We analyse these issues from an economic perspective, outlining the economic characteristics of transmission developments and public engagement. We identify previously overlooked features of the planning process that contribute to the rise in conflicts, public opposition and prolonged project realisation. The Scottish Beauly–Denny high voltage transmission development is discussed in detail and our findings indicate a need for better engagement with local communities at an earlier stage of planning. Trust between communities, developers and government is important for the negotiations and can be achieved through transparency, specific education and set guidelines for stakeholder engagement in the planning process.

Increasingly, local opposition to new electricity grid development projects cause lengthy delays and places financial and practical strain on the projects. The structure of the electricity industry is in transition due to the emergence of smaller but more numerous electricity generation facilities. Also, the general public and local communities are increasingly active and engage with energy and environmental issues. Thus, the traditional decision making frameworks and processes are proving less effective in solving the present time conflicts between local communities and other stakeholders. This paper proposes an economic approach to resolve such conflicts. This paper discusses how compensation, benefit sharing, and property rights can play a role in reducing community opposition to new grid developments. We argue that these methods need to be part of an overarching societal strategy and policy towards environmental effects of grid development. We then propose that such impacts can be addressed within the framework of 'weak' versus 'strong' sustainability. Finally, we suggest that the concepts of 'collective negotiation' and 'menu of options' in regulatory economics can be adapted to operationalize this sustainability-based approach to community engagement with new grid projects

Ambitious renewable energy targets and an aging infrastructure necessitate a substantial upgrading and expansion of the electricity transmission networks around Europe and beyond. Although vital for the functioning of the economy, grid development projects are often met by public opposition, which increase costs and lengthy planning processes. The current planning processes have proven ineffective at resolving the conflicts among stakeholders, indicating the need for a new approach. We analyse these issues from an Economic perspective, outlining the economic characteristics of transmission developments and public engagement. We identify previously overlooked features of the planning process that are contributing to the rise in conflicts, public opposition and prolonged project realisation. The Scottish Beauly-Denny high voltage transmission development is discussed in detail and our findings indicate a need for increased engagement with local communities at an earlier stage of planning. Trust between communities, developers and government is important for future negotiations and can be achieved through transparency, specific education and set guidelines for stakeholder engagement in the planning process.