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The need for revaluation of the model structure for electricity liberalization

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  • Szablewski, Andrzej T.
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    Abstract

    The question about an appropriate structure for the electricity industry has been extensively discussed in scientific literature and experts studies. Since the beginning of electricity liberalization, it was apparent for its promoters that such a structure (in this paper referred to as the model structure or ideal structural model) for the electricity sector should involve a separation of its four sub-sectors, i.e., generation, transmission, distribution, and supply. With the exception of transmission, each sub-sector should consist of many stand-alone type companies. Given the high degree of vertical and horizontal integration of the electricity sectors, their procompetitive restructuring (i.e., de-integration) became a standard component of electricity sector reform packages. This paper provides a concise review of the origins and justification of the initial model structure for electricity liberalization, as well as an overview of the restructuring developments in the early years of electricity liberalization. Some attention is also devoted to the EU’s unbundling initiatives. The core part of this paper discusses the first signs indicating the crisis of the initial structural canon. The paper concludes with some comments referring to the modified form for a model structure that is emerging. It involves vertical integration of generation and supply and allows a higher degree of horizontal concentration of the electricity competitive markets.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34898.

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    Date of creation: 2011
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    Handle: RePEc:pra:mprapa:34898

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    Keywords: electricity liberalization; model structure; unbundling; internal electricity market; EU restructuring developments;

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    1. Blumsack, Seth A. & Apt, Jay & Lave, Lester B., 2006. "Lessons from the Failure of U.S. Electricity Restructuring," The Electricity Journal, Elsevier, Elsevier, vol. 19(2), pages 15-32, March.
    2. Pollitt, M.G., 2008. "The Future of Electricity (and Gas) Regulation," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0819, Faculty of Economics, University of Cambridge.
    3. Paul Nillesen & Michael Pollitt, 2011. "Ownership Unbundling in Electricity Distribution: Empirical Evidence from New Zealand," Review of Industrial Organization, Springer, Springer, vol. 38(1), pages 61-93, January.
    4. Pollitt, M., 2007. "The arguments for and against ownership unbundling of energy transmission networks," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0737, Faculty of Economics, University of Cambridge.
    5. Bobinska, Krystyna, 2008. "The Defense of Monopoly as a Determinant of the Process of Transformation of State-owned Infrastructure Sectors in Poland," MPRA Paper 23991, University Library of Munich, Germany.
    6. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262720116, December.
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