Energy Deregulation Trends

The European energy sector is at a crossroads, with ever increasing demand and some uncertainties about supply. A number of European countries will require large scale replacement of generating capacity in the next decade, as either generating assets reach the end of their life or because policy decisions have been taken to phase out coal or nuclear plants. Germany is phasing out nuclear, which was bought to the forefront after the Fukushima nuclear accident, and the UK had planned to phase out both, although nuclear now looks set to be rebuilt and coal is enjoying a renaissance. In neither country is the future clear. The UK government, in particular, is avoiding the issue and says the market will decide and some observers predict an energy crisis in ten years in the UK because of this lack of preparation. In this climate of opinion, market liberalisation does not get a good press and after a “bedding in” period some governments and institutions are now questioning the success of market liberalisation in the energy sector. It was widely acknowledged when the concept was launched that it
was impossible to foresee all the outcomes, and many countries have designed liberalisation schemes including the successful parts of practice in other countries, or of different components of other schemes. With some experience under our collective belt, there is now empirical data to assess the results and there are different points of view on its success.

Some are calling for a return to government control to encourage decision making. It is not likely that this will happen but planners should be aware of this potential hazard in the path to liberalisation. Other issues have already caused governments of some states in the US to put energy market liberalisation plans on hold, as has happened in other isolated cases.

Market liberalisation and privatisation is a highly politicised matter on each side. In the US it is reported that the drive for electricity deregulation was led by seven groups, each of which advocated changes to the system to provide the greatest benefit to their members. These groups have spent a combined $50 million lobbying lawmakers, probably more, according to their own reports to Congress. On the other “side”, an activist opposition industry has been spawned, with institutes and organisations
opposing the process, often funded by socio-political interests such as public sector labour unions.