A framework for updating the regulation of isolated power systems in light of the energy transition imperative: The case of Chile

Isolated power systems, even in renewable-rich areas, remain heavily dependent on imported fossil fuels. Regulatory reforms largely target national interconnected grids, leaving these systems overlooked, and few regulatory frameworks extend beyond techno-economic analysis. This paper introduces a novel and comprehensive methodological framework to update the regulation of isolated power systems and enable their energy transition. It delivers a step-by-step, interdisciplinary, multi-actor process for diagnosing regulatory and market barriers, designing reforms, and producing legislation-ready recommendations. The framework comprises five main stages: (1) Principles definition and team formation, (2) Interdisciplinary and multi-actor diagnosis, (3) Interdisciplinary analysis and proposals development, (4) Synthesis and verification, and (5) Final proposal. Its objectives aim to accelerate the adoption of renewable and emerging technologies, reduce investor uncertainty, and involve local participation. We demonstrate the framework's application by analyzing Chile's isolated power systems and aligning regulatory proposals with local needs, regional and national energy-environmental goals. Resulting reform proposals include: expansion of regulatory principles; a new taxonomy for classifying power systems, plus a transition pathway between categories; an auction-based co-planning process; a revised tariff structure; and mechanisms for early citizen participation and transparency. Beyond offering Chilean policymakers concrete regulatory reforms for isolated power systems and their energy transition, the framework is readily adaptable to other countries facing similar challenges.