Energy liberalisation
Electricity liberalization refers to the liberalization of electricity markets. As electricity supply is a natural monopoly, this entails complex and costly systems of regulation to enforce a system of competition.
The standard model for electricity liberalization is the "British model", after the British system which began in the late 1980s with the privatization and vertical de-integration of the United Kingdom electricity industry. At a cost of over $3bn, a system of competition was developed to auction spare capacity through a central system. The risks involved for both generators and distributors have led to vertical re-integration.
Liberalization of electricity tends to substantially benefit large consumers (mainly industrial users), but benefits for domestic consumers compared with a public monopoly or a regulated private monopoly are questionable. There are also doubts over whether the system can ensure long-term security of supply through providing sufficient incentives to begin building generation capacity in time for when it is needed.
Electricity markets in the European Union are governed by the Internal Market in Electricity directive.
See also
- electricity market
- Privatization
- GATS (General Agreement on Trade in Services)
- European Union competition law
References
- Steve Thomas (2004), Electricity liberalisation: The beginning of the end, PSIRU, University of Greenwich [1]