Organisational and Institutional Barriers for Diffusion of Smart Grid Solutions in the Emerging Economies

Statement About an Independent Character of the Master Thesis 1
Abstract 2
Preface 4
Abbreviations 7
Introduction 8
Goal and Objectives 9
Thesis Structure 11
Chapter 1 12
Literature Review 12
Concepts definitions 12
1.1.Business Case for Smart Grid Technology: Consumption Patterns & Integration of Power Sources 14
1.2 Drivers and Barriers to Adoption of Smart Grid into Utility Business Model 19
1.3 Adoption of Smart Grid in the Emerging Economies: Challenges and Opportunities 31
1.4 Conclusion 37
Chapter 2 38
Theory 38
2.1 Technology Adoption within the TOE Framework 38
2.2 Disruptive Innovation Theory 40
2.2.1 Smart Grid as a Disruptive Innovation 42
2.3 Institutional Theory & Application to Technology Diffusion 44
Chapter 3 46
Methodology 46
3.1 Research Process 46
3.2 Selection of Literature 47
3.3 Selection of Research Method 48
3.4 Research Design 49
3.5 Selection of Interview Objects 51
3.6 Data Collection 51
3.7 Conclusion 52
Chapter 4 53
Research Findings 53
4.1 Analysis of the Research Results 53
Technological Barriers 55
Organisational Barriers 60
Environmental (Institutional) Barriers 67
4.2 Discussion of Results 79
Theory 79
Comparison of “Initial” Barriers & “Empirical” Barriers 82
Recommendations for Smart Grid Adoption in Emerging Economies 86
Limitations of the Research 97
Conclusion 98
Directions for Future Research 99
References 100
Appendix 112
Example Excerpts from Transcripts 112
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With a rapid development of new technological solutions for safe and efficient power distribution, it has become evident that there is a clear need in rethinking current and shaping new business models and implementation tools, which will help both incumbents and newcomers of the power grid industry to commercialise new technological solutions in order to provide value for both shareholders and every other stakeholder of the industry.
Specifically, digital technologies are penetrating every sphere of the energy industry and power grid industry as a part of it. Successful diffusion of ICT (information and communication technologies) to the electrical grid has potential to improve the quality, reliability and efficiency of electricity supply and to manage demand and reduce stress on the system [1].
This is particularly important, as nowadays, we witness a sharply increasing demand for power, which is accompanied with a seemingly contradictory trend: depletion of the fossil fuels, still widely used for electricity production [2] [3].
Producers in the traditional grid rely heavily on fossil fuels for power generation, thus providing society with unsustainable energy. Traditional centralised systems of power generation and obsolete technology drive power delivery costs rise, also burdening the network with inflexibility, which makes the grid unable to handle increased variation of energy sources and new consumption patterns among consumers. Moreover, in the traditional centralised systems installation, transmission, and distribution of power are exceedingly expensive in distant areas, making an economic incentive for a change. As a result, development of alternative ways for power generation and transmission is necessary to resolve aforementioned complex issues. [4]
Partly, Smart Grid appears to be the solution that could resolve some of the problems mentioned, however, the technology adoption has been troubling incumbent power grid companies for years. Technological solutions encompassed in Smart Grid concept increase complexity and interconnectedness of the network, thus, assuming renovated approaches to management of the grid.
Moreover, for successful implementation the technology creates a brand new dynamic in the value chain, thus implying rethinking utility firm business models, so the company can create additional value for its customers.
Smart Grid is widely considered to be a disruptive innovation for the energy sector, which has a potential to revolutionise the industry [5]. However, there are severe difficulties in integration and diffusion of the Smart Grid technologies into power grid companies' value chain. Mainly, they transform to organisational challenges involving issues about investment, operations and pricing, which also hinge heavily on policy and regulations.
Another aspect that is going to be addressed in this thesis is that as some elements of the Smart Grid are evolving and actively researched in OECD countries and other developed economies, Emerging Economies might lack access to the relevant innovation, expertise, investment and regulatory incentives to drive the technology forward and renovate existing power grid infrastructure.
Moreover, Emerging Economies possess unique institutional specifics, which directly influences the conditions for Smart Grid effective deployment. This issue also dictates the necessity of a continued research, as there is a significant lack of studies investigating barriers and constraints to Smart Grid adoption in Emerging Economies in a holistic manner, employing different institutional and organisational frameworks.
Thus, this thesis conducts a comprehensive study of the main challenges and barriers, constraining adoption and development of Smart Grids technology by power grid companies with the focus on the Emerging Economies, providing an in-depth understanding of the issue.
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