Regulatory Levers and Investment Decisions in Power Grid Digitalization: A System Dynamic Approach

Digitalization is a key enabler for modernizing energy systems and optimizing grid operations. This study uses a system dynamics model to represent the complex interactions between regulatory incentives and Distribution System Operators’ (DSOs) investment and operational decisions, with a focus on digitalization. Using the Australian regulatory context, the model was iteratively validated through interviews with experts from National Regulatory Authorities, Academia, and DSOs. Eleven critical feedback loops were identified, highlighting mechanisms that hinder digital investments. Our findings suggest that tailored regulatory incentives can significantly enhance digitalization efforts, offering valuable insights applicable across different regulatory frameworks to support grid modernization.