Grid regulation in Austria: smart grids incentives or disincentives?

On European and national level grid initiatives, technology platforms as well as other stakeholders are debating how the future grid structure should be organized to cope with upcoming challenges like increased distributed deployment of renewable generation. In Austria. smart grids. are currently one of the most popular suggested grid infrastructure solutions. But on the regulatory level many open questions still remain to be answered. The purpose of this paper is to discuss the question, whether the current regulatory regime in Austria is able to provide sufficient incentives for distribution grid operators to invest in such innovative grid structure options, especially if this requires less capital-intensive investments. Thereby, the actual power of the so-called. carry-over. mechanism is discussed and an analytical framework demonstrates the required shape of the carry-over rate in order to impose sufficient incentives. Additionally, an inherent rate-of-return regulation - literally. through the back door. - within the current price cap regime in Austria is identified.