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Network unbundling and flawed coordination: Experience from the electricity sector

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  • Brunekreeft, Gert

Abstract

What is a good balance between competition and coordination? On the upside, unbundling in network industries promotes competition, but this should be balanced against the downside of unbundling, that is, the cost of coordination. Firm-internal coordination falls away and must be replaced by external market mechanisms. This is a non-trivial task. The cost of flawed coordination resulting from fragmentation can be substantial and policy should focus more on market mechanisms and governance structures to secure better coordination. This paper examines the problem of coordination and discusses with real-world examples why the market faces difficulty in providing effective coordination.

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  • Brunekreeft, Gert, 2015. "Network unbundling and flawed coordination: Experience from the electricity sector," Utilities Policy, Elsevier, vol. 34(C), pages 11-18.
    • Handle: RePEc:eee:juipol:v:34:y:2015:i:c:p:11-18
    DOI: 10.1016/j.jup.2015.03.003
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    References listed on IDEAS

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    8. Sugimoto, Kota, 2019. "Does transmission unbundling increase wind power generation in the United States?," Energy Policy, Elsevier, vol. 125(C), pages 307-316.
    9. Marius Buchmann, 2019. "How decentralization drives a change of the institutional framework on the distribution grid level in the electricity sector – the case of local congestion markets," Bremen Energy Working Papers 0031, Bremen Energy Research.
    10. Friedrich Kunz and Alexander Zerrahn, 2016. "Coordinating Cross-Country Congestion Management: Evidence from Central Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Sustainab).
    11. Giulietti, Monica & Le Coq, Chloé & Willems, Bert & Anaya, Karim, 2019. "Smart Consumers in the Internet of Energy : Flexibility Markets & Services from Distributed Energy Resources," Other publications TiSEM 2edb43b5-bbd6-487d-abdf-7, Tilburg University, School of Economics and Management.
    12. Marius Buchmann, 2016. "Information Management in Smart Grids - Who Should Govern Information Management to Balance Between Coordination and Competition on the Distribution Grid Level?," Bremen Energy Working Papers 0022, Bremen Energy Research.
    13. Gert Brunekreeft, Marius Buchmann, and Roland Meyer, 2016. "The Rise of Third Parties and the Fall of Incumbents Driven by Large-Scale Integration of Renewable Energies: The Case of Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Bollino-M).
    14. Gerard, Helena & Rivero Puente, Enrique Israel & Six, Daan, 2018. "Coordination between transmission and distribution system operators in the electricity sector: A conceptual framework," Utilities Policy, Elsevier, vol. 50(C), pages 40-48.
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    More about this item

    Keywords

    Electricity; Networks; Unbundling; Coordination; Incentives;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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