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Vertical separation of the energy-distribution industry

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Author Info
Machiel Mulder
Victoria Shestalova ()
Marc Lijesen

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Abstract

The Dutch Minister of Economic Affairs has proposed to replace the currently implemented structure of legal unbundling of the energy distribution industry by ownership unbundling. In this study we analyse costs and benefits of this proposal, compared to the current situation, and to two alternative options that strengthen legal unbundling. We identify four mutually-related categories of benefits: better performance of networks, more efficient regulation, improved effectiveness of competition, and benefits of privatisation; and three categories of costs: one-off transaction costs, loss of economies of scope and the risk of less investment in generation. The analysis highlights that the benefits depend on the future development in small-scale generation and on allocation of the management of transmission networks. Mainly because of the uncertainty about the future role of small-scale generation and the uncertainty about the magnitude of the one-off transaction costs related to cross-border leases, the net welfare effect of ownership unbundling at the distribution level is ambiguous. We identify an alternative route for achieving some of the benefits considered.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Documents with number 84.

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Date of creation: Apr 2005
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Handle: RePEc:cpb:docmnt:84

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Related research
Keywords: network industries electricity market industrial organisation unbundling regulation

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Find related papers by JEL classification:
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul de Bijl, 2005. "Structural Separation and Access in Telecommunications Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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