Critical infrastructures: Aligning institutions and technology.

Infrastructures are critical since they support very fundament needs related to the provision of energy, communication and transportation. Hence, safeguarding the expected performance of these sectors is of utmost importance. An integrated approach of engineering and institutional economics is required to meet this challenge. In infrastructures technology and economic institutions are closely related. Critical technical functions need to be safeguarded otherwise the technical system will 'break down' in the most extreme case. In the electricity sector for instance, load balancing of the production and consumption of power is a critical technical function. Safeguarding these critical technical functions is a coordination problem, both from an engineering and institutional economic perspective. Technical and institutional coordination mechanisms need to be aligned in order to safeguard the expected system performance. For instance, in the electricity sector innovative technologies allow for small-scale power production. Even individual households can produce power, for example by solar panels. Hence, households evolve from consumers to 'prosumers' of power. In order to facilitate these technical developments, institutional changes are required. Responsibilities and institutional arrangements with respect to critical technical functions need to be reconsidered. To be sure, it is not only technology that drives the ongoing changes in infrastructures. Governmental regulation can provide incentives in favor of specific technologies, like for instance electric cars, offshore wind energy systems, or high speed internet connections. Also the ongoing process of liberalization and privatization of infrastructures strongly influences technological developments in these vital sectors. Failures in the performance of infrastructures can often be related to a misalignment between the technical and institutional requirements that safeguard the critical technical functions.

R.W. Künneke

27-3-2013 14:00:00