Inducing Energy Network Innovation for Green Transition in the European Union: A Tripartite Evolutionary Game Model

Abstract

The aim of this thesis is to investigate how energy networks in the European Union can be encouraged to increase innovation with decarbonization goals. This is done by analysing a tripartite evolutionary game model with the European Commission, national regulators and energy networks in the European Union being the three groups of players in the game. I find that the only evolutionary stable state of the game is the state where all three groups of players choose their cooperation strategies. For the Commission and the regulators, this involves changing regulations and regulatory mechanisms, respectively, in order to induce innovation. For the energy networks, it involves investing in innovation with decarbonization goals. On the basis of the assumption that the initial probability of the Commission choosing its cooperation strategy is relatively high and the initial probabilities of the regulators and the energy networks choosing their cooperation strategies is relatively low, numerical simulations suggest that the convergence rate to the evolutionary stable state can be increased if the Commission increases the probability of the energy networks receiving some average external funding and the penalty imposed on regulators in case they do not change their regulatory mechanisms in order to induce innovation. Altogether, the Commission plays a significant role in reaching the stable state.