1 / 20

Ownership Unbundling

Ownership Unbundling. – The appropriate route to increased competition? –. Results of an A.T. Kearney study. Brussels, February 13 2008. Agenda. Page. Effects of Ownership Unbundling 3 Drivers of competition in the electricity market 15. Effects of Ownership Unbundling.

kalare
Download Presentation

Ownership Unbundling

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Ownership Unbundling – The appropriate route to increased competition? – Results of an A.T. Kearney study Brussels, February 13 2008

  2. Agenda Page • Effects of Ownership Unbundling 3 • Drivers of competition in the electricity market 15

  3. Effects of Ownership Unbundling

  4. Ownership Unbundling postulated by the EU Commission has already been implemented on transmission level in many countries Germany, France, Austria and Greece are the only countries in the EU-15, that have implemented Legal Unbundling Ownership Unbundling on distribution level has been realized in Great Britain only, while Legal Unbundling is a European-wide standard According to the EU Commission "ownership unbundling has a number of positive impacts on the market by stimulating investment in particular in interconnectors, reducing market concentration and bringing down prices." Effects of Ownership Unbundling In EU-15 the majority of countries have implemented Ownership Unbundling on transmission level Unbundling among EU-15 Transmission Operators – Overview1) Is this a fact? Legal Unbundling Ownership Unbundling Independent System Operator 1) Status 1. January 2007 incl. Norway, excl. Luxemburg Source: Regulatory authorities, EU Commission, A.T. Kearney

  5. Effects of Ownership Unbundling Networks in countries with Legal Unbundling have been more reliable in recent years Unplanned Interruption (minutes lost per customer, average 2004-2006) (1) (2) (3) (2) (3) (2) (2) (4) (2) Legal Unbundling Ownership Unbundling Independent System Operator 1) Norway started detailed interruption recording in 2005; 2) 2004-2005; 3) only 2004; 4) only 2005 Source: E-Control, Fingrid, VDN, TenneT, CEER, EU Commission

  6. IT IRL DE PT NL NOR UK BE DK SWE AT ES F FIN GR Effects of Ownership Unbundling Electricity prices for household customers increased across all countries in Europe… Development of Prices for Households 1998-2007(1)(in ct./kWh) Average CAGR 1998-2007 Ownership Unbundling: +3.0% Legal Unbundling: +0.7% Legal Unbundling Ownership Unbundling 1) Consumption of 3.500 KWh p.a without tax Source: EUROSTAT, A.T. Kearney

  7. Effects of Ownership Unbundling …for industrial customers the trend is the same Development of Prices for Industry 1998-2007(1)(in ct./kWh) Average CAGR 1998-2007 Ownership Unbundling: +4.0% Legal Unbundling: +0.9% IRL IT UR DE BE PT ES NOR GR DK SWE FIN F Legal Unbundling Ownership Unbundling 1) Consumption of 2.000 MWh p.a without tax Source: EUROSTAT, A.T. Kearney

  8. Effects of Ownership Unbundling Wholesale prices in legal unbundled countries did not rise faster than in ownership unbundled countries Development of Wholesale Prices -31% CAGR +15.2% Germany In 1998, liberalization started for all customer groups in one step 1) EEX Spot prices (Base in Cent/kWh) CAGR +21.2% -54% Sweden Gradual liberalization between 1996 and 1999 Nordpool Spot prices in (SEK/kWh) -28% CAGR +25.2% Great Britain Gradual liberalization between 1991 and 1998 IEA Wholesale index in %; (1996 = 100) Liberalization Period 1) until 1999 IEA Wholesale price index, as of 2000 EEX Spot Base Source: EEX, Nordpool, IEA Wholesale price index, A.T. Kearney analysis

  9. Effects of Ownership Unbundling Except for Great Britain, there is no clear correlation between type of unbundling and investment activities Selection Investments into the grid/transmission volume1) (in €/GWh) Legal Unbundling Ownership Unbundling 1) 2004 to 2006 Source: A.T. Kearney Analysis

  10. Effects of Ownership Unbundling Even the development of cross-border transmission capacity lacks consistency Development of cross-border transmission capacity 2000-2006(in %) Ø BE PT AT ES IT NL FIN DE F NO SE DK Legal Unbundling Ownership Unbundling Source: UCTE, Nordel, A.T. Kearney Analysis

  11. Effects of Ownership Unbundling No clear correlation in the ratio import capacity/generation capacity can be identified Average import capacity/generation capacity1)(in %) Legal Unbundling Ownership Unbundling 1) 2006 Source: ETSO, A.T. Kearney

  12. Effects of Ownership Unbundling In absolute terms, grid access tariffs in Europe differ widely and are not linked to ownership unbundling Transmission tariffs 20061)(in €/MWh) Legal Unbundling Ownership Unbundling Independent System Operator 1) Except for other regulatory changes that are not directly linked to TSO activities such as standard costs, public interest, renewable energies etc. Source: ETSO, A.T. Kearney

  13. Effects of Ownership Unbundling No correlation between grid tariffs development and type of unbundling can be observed Development of Transmission Tariffs 2003-2006(Index 2003=100) CAGR 2003-2006 Average CAGR 2003-2006 Ownership Unbundling: +0.1% Legal Unbundling: -0.1% Legal Unbundling Ownership Unbundling Source: ETSO, A.T. Kearney

  14. Effects of Ownership Unbundling Networks in countries with Legal Unbundling are more reliable – grid tariffs below average Backup Summary Unplanned Interruptions vs. Grid Tariffs Grid Access Tariff TSO (in €/Mwh) Ø 91 DK East DK West IT UK IRL DE Ø 7.0 FR AT NOR ES FIN NL SW Ownership Unbundling ISO Interruption Time in minutes lost per customer(Ø 2004-2006) Legal Unbundling Source: E-Control, Fingrid, VDN, TenneT, CEER, EU Commission, ETSO, A.T. Kearney analysis

  15. Drivers of competition in the electricity market

  16. Drivers of competition in the electricity market In competitive development certain stages with certain characteristics can be observed Stages of competitive development Market development Competitive market Market opening 1 Grid Accesstariffs 2 Retailmargins 3 Churn rates Source: A.T. Kearney

  17. Drivers of competition in the electricity market First the regulator reduces grid tariffs through cost and incentive regulation Grid Access Tariffs Low Voltage1)(in ct./kWh) Tenure of Regulatory Authorities 2005 1999-2001 1989-1998 Household Customers Market Opening 2007 Household Customers Market Opening 2007 BE 2) LUX IT DE AT IRL DK FRA NL SWE FIN POR ES UK Ø 1) Status 2005 2) Estimated mean value Source: Eurelectric, CEER, A.T. Kearney

  18. Drivers of competition in the electricity market A decrease in grid tariffs increases retail margins and makes alternative suppliers more competitive Retail Margins Electricity – Households1)(in ct/kWh) High Competitive Retail Markets Retail Margin Households 2006 (in ct/kWh) Low Competitive Retail Markets Cumulated churn rates (in %) 2004 2005 2006 1) GWh 2) Annual Consumption: 3.500 kWh; Retail margin is calculated by taking the energy component (retail prices less taxes and grid tariffs) and deducting wholesale future prices. For UK spot prices where taken. Source: EUROSTAT, UKPX, Nordpool, EEX, EEXA, EU Kommission, regulatory authorities, A.T. Kearney Analysis

  19. Drivers of competition in the electricity market In particular lengths and type of regulation drive competition in the European electricity markets Competition drivers Regulatory experience • The longer a regulator is installed in a market, the better the competition • Experience shows (e.g. in Great Britain and Scandinavia), that establishing a working regulatory system as prerequisite for competition requires a few years Low grid tariffs/attractive retail margins • Countries with a longer regulatory experience have lower grid tariffs and higher retail margins • New suppliers require comfortable retail margins for a sustainable interest in the electricity market Market integration • Only an integrated European electricity market ensures variety and increase in number of suppliers on the generator side  large market shares in regional markets reduce in a European market

  20. Drivers of competition in the electricity market Actions to stimulate competition should orientate towards identifiable drivers of competition Actions to stimulate competition 1 • Raise transparence standards on a common level across Europe, e.g., in terms of invoice information on utilities, price changes etc. • Simplify and accelerate churn process • Ensure grid access for new players, e.g., improve data provision through grid operators Effectively harmonized regulation in all markets 2 • Across Europe the current legal framework is not leveraged in the sense of the objective • Intensification of Legal Unbundling, e.g. asset transfer, increased independence through incorporated company with independent representatives in advisory board and allocation of grid activities to grid company Tougher implementation of Legal Unbundling on all grid levels 3 Investment guidelines to all EU-countries for cross-border transmission capacities • A domestic electricity market in Europe can in the long term only be achieved by high performing transportation grid connections • Legally binding provisions for the realization of grid connections are imposed for all EU-member states

More Related