Association for Public Policy Analysis & Management

Over the last decade, renewable energy adoption has seen ten-fold growth in solar energy and eight-fold growth in wind power in the U.S. Several U.S. states adopted ambitious mandates that required electrical utilities to procure up to 100% of electricity from renewable energy sources. However, given the intermittent nature of renewable energy, additional efforts will be needed to integrate these sources into the electrical grid. Increasing the amount of solar power integrated into the electrical grid creates a so called “duck curve”: a significant drop in energy demand in midday that coincides with high solar activity, and an increase in the overall load at night when the solar capacity decreases. In addition, the electrical grid is becoming increasingly decentralized: The growth of “behind-the-meter” electricity generation and storage as well as the growth of energy efficiency and demand-side management activities. The time of electricity use becomes critical. For instance, the charging of electric vehicles can tax the grid if done during on-peak hours; conversely, electric vehicles can become a distributed storage source that absorbs power during off-peak hours. All these changes require energy sector participants to engage in innovative activities to adapt to this set of changing circumstances and ensure grid reliability and flexibility. Existing literature identifies the two approaches to innovation. The “closed” approach to innovation suggests that ensuring rigid copyright regimes helps reward innovators and that competition enhances creative activity. On the other hand, the “open” approach to innovation advocates for collaboration and information sharing among firms to help establish new configurations of existing knowledge and boost innovation. Both “closed” and “open” approaches are viable tactics in innovation management. I propose a study that identifies the boundary conditions for each approach to be most effective. I posit the following research question: How do different models of innovation help increase grid flexibility? I will use a case study of innovations attempted by energy sector participants in the State of California to enable time-differentiated and location-differentiated electricity services. I will conduct document analysis and will use semi-structured interviews with a panel of stakeholders representing electrical utilities, state and municipal government, academic community, and advocacy groups. The study concludes with several policy recommendations for establishing a level playing field for both open and “closed” innovation approaches to ensure grid flexibility.