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Energy policy and European utilities' strategy: Lessons from the liberalisation and privatisation of the energy sector in Romania

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  • Haar, Laura N.
  • Marinescu, Nicolae

Abstract

In the context of energy sector reforms pursued by Romanian government since 1990s, we compare and contrast the market outcomes of European utilities' investment with the host government policy objectives. We begin with energy market reform in Romania and review governments' efforts to attract foreign direct investment (FDI) and to gradually withdraw from the distribution and supply segments of electricity market. Subsequently, we illustrate the scope European utilities have had, market policy and design notwithstanding, for consolidating market power through regional dominance. We examine the extent to which these utilities have sought to enhance their positions through horizontal and vertical integration, counter to the EU plans for a competitive market structure. We find that the investments of European incumbents have not been resoundingly successful: although market entrance may have been justified on long-term strategic grounds, in the immediate term, segments acquired through competitive auctions have yielded modest regulated returns. Finally, we discuss the extent to which policy makers have achieved their goals. Although the short-term benefits of a competitive market structure have reached some consumers, a renewed interest in promoting 'national champions' reflect frustration with market mechanisms as a means of ensuring long-term strategic investments in the sector.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 39 (2011)
Issue (Month): 5 (May)
Pages: 2245-2255

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Handle: RePEc:eee:enepol:v:39:y:2011:i:5:p:2245-2255

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Web page: http://www.elsevier.com/locate/enpol

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Keywords: Energy policy Foreign direct investment Market structure;

References

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  1. Jamasb, Tooraj & Mota, Raffaella & Newbery, David & Pollitt, Michael, 2005. "Electricity sector reform in developing countries : a survey of empirical evidence on determinants and performance," Policy Research Working Paper Series 3549, The World Bank.
  2. Estache, Antonio & Rossi, Martin A., 2005. "Do regulation and ownership drive the efficiency of electricity distribution? Evidence from Latin America," Economics Letters, Elsevier, vol. 86(2), pages 253-257, February.
  3. Deitz, Laura & Stirton, Lindsay & Wright, Kathryn, 2009. "South East Europe's electricity sector: Attractions, obstacles and challenges of Europeanisation," Utilities Policy, Elsevier, vol. 17(1), pages 4-12, March.
  4. Ramamurti, Ravi & Doh, Jonathan P., 2004. "Rethinking foreign infrastructure investment in developing countries," Journal of World Business, Elsevier, vol. 39(2), pages 151-167, May.
  5. Hooper, Elizabeth & Medvedev, Andrei, 2009. "Electrifying integration: Electricity production and the South East Europe regional energy market," Utilities Policy, Elsevier, vol. 17(1), pages 24-33, March.
  6. David M. Newbery, 1994. "Restructuring and privatizing electric utilities in Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(3), pages 291-316, 09.
  7. Diaconu, Oana & Oprescu, Gheorghe & Pittman, Russell, 2009. "Electricity reform in Romania," Utilities Policy, Elsevier, vol. 17(1), pages 114-124, March.
  8. Ramamurti, Ravi, 2003. "Can governments make credible promises? Insights from infrastructure projects in emerging economies," Journal of International Management, Elsevier, vol. 9(3), pages 253-269.
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