Wednesday, April 30, 2008

Global Electricity Market Deregulation

Deregulation and privatisation in the electricity sector is now reaching a stage around the world when it is possible to discern some patterns and factors emerging, based on experience rather than hypothesis about what ought to happen. Some outcomes have been good but some have been bad, notably in North America, and electricity market liberalisation has advocates and critics.

The momentum towards liberalisation of the electricity supply industry continues around the world but it proceeds at varying paces. As a region, only the EU is moving systematically in a co-ordinated manner, while other markets are developing new structures on an individual country basis. In February 2006 the European Commission published a critical report drawing attention to a number of aspects in which progress towards electricity market liberalisation is considered unsatisfactory.

The countries of the EU, with the United Kingdom and Scandinavia at the forefront, have been leaders in creating the sea change which liberalisation of the energy markets is bringing. In July 2007 the final stage was reached for most EU countries in which electricity markets have been fully opened to all customers. A number of countries have negotiated ‘derogations’ in which they have delayed or reduced the scope of the change, due to special circumstances in their markets. One of the main reasons for this is the small size of a market, which only justifies the existence of one generator or very few, thus making competition unfeasible. In practice there are many imperfections in the new European structure, due either to original structural conditions or failures in implementing new rules. The EU Commission has been monitoring progress and is implementing new rules. It may be many years before the optimum situation is reached.


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