European Energy Restructuring:
The Quest for a Competitive Single Energy Market
Christopher Burleson
Leslie Kay Ritchie
Jitesh Sharma
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
Presentation:
1.
2.
3.
4.
Overview of EU and Restructuring Vision
Comparison of European Restructuring
to U.S. Restructuring
Timeline: Implementation of EU
Directives & Description of EU Energy
Stakeholders
Impediments to Single Market &
Recommendations
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
• EU Vision:
– To liberalize the
electricity markets
into a single, internal
competitive model
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
• The EU has determined three objectives for a
comprehensive European energy policy:
– (1) combating climate change
– (2) promoting jobs and growth,
– (3) limiting the EU's external vulnerability to gas and oil
imports.
–
News Release, An energy policy for Europe: Commission steps up to the energy challenges of the 21st Century, 10
January 2007.
27 Member States of the EU
1958
Belgium, France, (West)
Germany,
Italy, Luxembourg,
Netherlands
1973
Denmark, Ireland, UK
1981
Greece
1986
Portugal, Spain
1995
Austria, Finland, Sweden
2004
Cyprus, Czech Republic,
Estonia, Hungary,
Latvia,
Lithuania, Malta, Poland,
Slovakia,
Slovenia
2007
Romania
The EU’s “Institutional Triangle”
European Parliament:
represents the EU’s citizens
and is directly elected by them
Council of the European
Union:
European
Commission:
represents the individual
member states
seeks to uphold the
interests of the whole Union
European Regulators' Group for
Electricity and Gas:
advisory body on internal energy market issues.
Comparative Study:
U.S. vs. European Restructuring Models
• U.S. Electric Power Markets
(clockwise from top)
–
–
–
–
–
–
–
–
–
–
Northwest
Midwest
New York
New England
PJM (Beige)
Southeast
SPP
ERCOT
Southwest
California
Comparative Study:
U.S. vs. European Restructuring Models
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
Similarities between Europe & U.S.
Restructuring
• Both Driven by Top-Down Political Maneuvering
• Both Protect Against Price Volatility
• Both Work to Ensure Sufficient Energy Capacity
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
Differences between Europe & U.S.
Restructuring
• Structure of Market
• Infrastructure/Transmission Management
• Relative Capability of Facilitating Restructuring
• Comparative Success of Response to Transmission
Discrimination
Liberalisation process – Timeline
1996
2003
Source: Union of the Electricity Industry, Eurelectric
2007
20??
Liberalisation process – Timeline
Cross Border Trade Regulation
Effective
Florence Forum
European Regulators Group for
Electricity & Gas
1st Electricity Directive:
96/92/EC
CEER
1996
1998
2003
2nd Electricity Directive:
2003/54/EC
2004
2005
Directive on Electricity
Security of Supply and
Infrastructure
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
Key Indicators –
Single market not working
• Significant price differences prevailing in the internal markets
– Price difference of more than 100% for industrial users in some
cases
• Low level of cross border trades
– Cross border flows was at 10.7% of consumption at the end of
2004
– Increased only by 2% in 4 years
• Prices have been increasing instead of decreasing as part of
increased competition in the market
• Lack of real competition
– Switching by customers remains limited in most Member States
– Choosing a new supplier from another Member State remains the
exception
Key Indicators –
Single market not working
Prices in different regions
Market share of biggest three
producers
Key Indicators –
Single market not working
Impediments for single market
•
Insufficient interconnection between many Member States, leading to
congestion
•
Concentration and consolidation in the industry
–
•
Independence of network operators
–
•
Vertical integration between generation and retail markets
long term power purchase agreements lead to illiquid wholesale markets.
Lack of transparency
–
–
•
There is an inadequate unbundling between network and supply activities
Vertical foreclosure
–
–
•
Number of newcomers has decreased
Survey shows that 84% people feel that they do not have current market information
Only a few TSOs publish all information related to network access and availability
Lack of FERC like regulatory authority
Impediments for single market
•
Insufficient interconnection between many Member States, leading to
congestion
•
Concentration and consolidation in the industry
–
•
Independence of network operators
–
•
Vertical integration between generation and retail markets
long term power purchase agreements lead to illiquid wholesale markets.
Lack of transparency
–
–
•
There is an inadequate unbundling between network and supply activities
Vertical foreclosure
–
–
•
Number of newcomers has decreased
Survey shows that 84% people feel that they do not have current market information
Only a few TSOs publish all information related to network access and availability
Lack of FERC like regulatory authority
What should be done?
•
Investments in electricity generation and infrastructure
•
Separate supply and production activities from network operation
– Require strong national regulators to oversee the running of electricity and
gas markets
•
Establish an independent mechanism for cooperation and governance
among national regulators (FERC-like authority)
•
Greater transparency in energy market operations
–
Create mechanism for transmission system operators to improve
coordination of networks operation.
European Energy Restructuring:
The Quest for a Competitive Single Energy Market
Thank you!
Questions?