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• Machiel Mulder

Five years after launching the process of electricity liberalisation, dominance of large utilities, lack of international transmission capacity, and national energy policies hinder the creation of competitive energy markets in Europe. Consequently, the expected downward convergence of electricity prices for EU business and EU consumers has only partly been realised.

Established utility companies still have a strong position on some national electricity markets. By means of (inter)national mergers, they increase their market shares at the European level. As a consequence, the price of electricity remains at a higher level than the costs of generating the electricity. In addition, producers lack strong incentives to decrease costs and to develop new techniques of generation owing to missing fierce competitive market forces.

The paper shows that liberalising electricity markets increases competition provided that adequate institutional arrangements have been made. This requires, in general terms, combating dominant positions of producers by splitting up large established utility companies and implementing adequate surveillance on mergers, increasing capacities of interconnectors among the several member states, establishing spot markets at an international level, and encouraging transparency of national policies regarding production, transmission and trade.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Documents with number 33.

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Date of creation: Jul 2003
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Handle: RePEc:cpb:docmnt:33

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Related research

Keywords: energy; electricity; liberalisation; liberalization; competition; transmission; europe; european union;

Find related papers by JEL classification:
Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
F15 - International Economics - - Trade - - - Economic Integration

This paper has been announced in the following NEP Reports:

• NEP-ALL-2003-08-17 (All new papers)
• NEP-COM-2003-08-17 (Industrial Competition)
• NEP-EEC-2003-08-17 (European Economics)

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