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Competition in European Electricity Markets

Competition in European Electricity Markets

A Cross-country Comparison

Edited by Jean-Michael Glachant and Dominique Finon

This book focuses on the diversity of electricity reforms in Western Europe, drawing evidence from ten European Union memberstates plus Norway and Switzerland as associate members. The contributors analyse the various ways of introducing competition in the European electricity industries, and consider both the strategies of electricity companies and their behaviour in electricity marketplaces. They also offer an explanation of the differences of reforms by the institutions and the industrial structures of each country which shape the types of marketrules, industrial restructuring and public service regulations which have been adopted.

Chapter 1: The Making of Competitive Electricity Markets in Europe: No Single Way and No ‘Single Market’

Jean-Michel Glachant

Subjects: economics and finance, competition policy, energy economics, industrial organisation


Jean-Michel Glachant INTRODUCTION Competitive reforms are causing an unprecedented shake-up of the European electricity market, affecting not only the 15 countries of the European Union (EU), but extending beyond them to nations like Norway and Switzerland, as well as to applicants for membership in the EU (Poland, Hungary, the Czech Republic, and so on). During the second half of 1996, adoption of Directive 96/92 on the creation of an ‘internal market for electricity’ marked a turning point in energy sector liberalization policies in Europe. Previous to that, competitive reform of electricity had only begun in a handful of countries: Great Britain and Norway in the early 1990s, and Finland and Sweden in 1995 and 1996. With the entry into force of this directive in February 1999, and parallel movements in Norway and Switzerland as well as in the applicants, a group of 20 countries are now simultaneously opening their electricity sectors to competition. This incipient European market represents nearly 3000 TWh in potential consumption – almost six times that of Germany – with approximately 450 million domestic consumers. What is the shape of this new competitive electricity sector? Is there convergence towards a single model or, conversely, does a significant diversity persist? What structural changes were catalysed by electricity market liberalization in Europe? In fact, five years after adoption of Directive 96/92, the European ‘internal market’ for electricity is neither unified nor uniform. Even within the EU, each country appears to be cultivating its own preferred variant on the...

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