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Impact of Liberalization of the Electricity Market on Energy Efficiency, Quality of Supply and Environmental Performance
Eric BONNEVILLEECI Webconference - 20 oct. 05
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 2/21
Overview of the European Electricity Industry before liberalization
Definitions, historical steps, objectives / general energy policy
Focus on international experience Costs, benefits and impacts of liberalization• Electricity prices, market opening costs,• energy efficiency investments,
employment, • cross-border transmission and quality of
supply
Outline
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 3/21
European Electricity IndustryGeneration and consumption in EU15
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 4/21
European Electricity IndustryElectricity generation - UK
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 5/21
European Electricity IndustryElectricity generation - Germany
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 6/21
European Electricity IndustryElectricity generation - France
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 7/21
The EU Directive of opening the marketDefinitions
Generation Transmission Distribution Supply
national / regional monopolies
Electricity Supply Industry
“unbundled” = vertical disintegrated
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 8/21
1990 - Transparency of electricity prices Directive 1990 - Grid Network Directive 1996 - Guides for the Liberalization of the Electricity
sector 2003 - New electricity Directive
Implementation steps• 1999 - 26%• 2000 - 28%• 2003 - 33%• 2007 - 100%
The EU Directive of opening the marketHistorical steps
of national electricity consumption liberalized
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 9/21
Three main objectives of the EU energy policy:• security of supply• economical efficiency • protection of the environment
Objectives of the liberalization:• improve efficiency + productivity• positive results on end-users + environment• prices decrease• security of supply
The EU Directive of opening the marketObjectives
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 10/21
European pioneer (1983 - 1989)
NETA (New Electricity Trading Agreement)• goal of 50% price reduction• bilateral agreements
Concentration => vertically integrated companies
110 000 jobs lost between 1990 and 1995
Benefits breakdown (billions of pounds)• Government +1.2 to 0.4 • Shareholders +9.7 to 8.1• Consumers -1.3 to 4.4
Focus on international experiencesUK
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 11/21
1998 - fully opened market no deep structural reform price decrease• 20% for industry• 5% for residential
Employment decline• 18 000 jobs 1993-1997• 64 000 jobs 1997-2000
reduction of the market actors only 0.1 to 0.5% of foreign producers
Focus on international experiencesGermany
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 12/21
1992 - Federal Power Act => FERC authority to deregulate 1994 - liberalization process launched by the PUC 1996 - Californian Power Exchange 2000 - Electricity crisis with rolling blackouts 2001 - 10 billion USD needed to cover the fixed tariffs
contracts
small generation margin degradation of the reliability decrease of energy efficiency investments (1993-2000)
Regulatory agency created + price caps re-introduction
Focus on international experiencesCalifornia
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 13/21
Costs, benefits and impactsElectricity prices - Industry
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 14/21
Costs, benefits and impactsElectricity prices - Residential
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 15/21
Costs, benefits and impactsMarket opening costs
• meter costs • IT systems • other network business costs
Queensland184 million $ over 5 years
UK121 million £/yr over 7 years
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 16/21
Costs, benefits and impactsEnergy Efficiency Investments
more competitive marketshort-term price reduction €
Energy Efficiencyinvestments
“the market itself won’t deliver Energy Efficiency”
mandatory mechanisms
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 17/21
Costs, benefits and impactsEmployment
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 18/21
Costs, benefits and impactsCross-border transmission capacities
fully opened market high capital intensity and long horizon need for energy demand forecasts and planning
markets dominated by strong national players in 2004, only 10.7% of the electricity consumption
was exchanged between the 22 countries energy efficiency needed, education programmes “the European market will not exist” J.Syrota 2003
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 19/21
Costs, benefits and impactsQuality of supply
Council of European Energy Regulators (CEER):• continuity of supply
• voltage quality
• commercial quality Liberalization / environmental improvements:
conflicting targets Increased competition and risk => lower costs security of supply: long term investments production planning
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 20/21
Conclusion
Growing electricity - worrying issue Mismatched liberalization targets:• price decrease did not occur• lack of long term investments in energy efficiency• lack of new generation plants / transmission lines• no physical European market
Strong political strategy of reducing the energy consumption• Networks regulators• independent body agencies
AERE - Impacts of liberalization on Energy Efficiency - ECI Webconference 20 Oct. 05 21/21
Thank you for your attention
www.aere.fr