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Christopher Burleson Leslie Kay Ritchie Jitesh Sharma

European Energy Restructuring: The Quest for a Competitive Single Energy Market. Christopher Burleson Leslie Kay Ritchie Jitesh Sharma. European Energy Restructuring: The Quest for a Competitive Single Energy Market. Presentation:. Overview of EU and Restructuring Vision

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Christopher Burleson Leslie Kay Ritchie Jitesh Sharma

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  1. European Energy Restructuring:The Quest for a Competitive Single Energy Market Christopher Burleson Leslie Kay Ritchie Jitesh Sharma

  2. European Energy Restructuring:The Quest for a Competitive Single Energy Market Presentation: Overview of EU and Restructuring Vision Comparison of European Restructuring to U.S. Restructuring Timeline: Implementation of EU Directives & Description of EU Energy Stakeholders Impediments to Single Market & Recommendations

  3. European Energy Restructuring:The Quest for a Competitive Single Energy Market • EU Vision: • To liberalize the electricity markets into a single, internal competitive model

  4. European Energy Restructuring:The Quest for a Competitive Single Energy Market • The EU has determined three objectives for a comprehensive European energy policy: • (1) combating climate change • (2) promoting jobs and growth, • (3) limiting the EU's external vulnerability to gas and oil imports. • News Release, An energy policy for Europe: Commission steps up to the energy challenges of the 21st Century, 10 January 2007.

  5. 27 Member States of the EU 1958 Belgium, France, (West) Germany, Italy, Luxembourg, Netherlands 1973 Denmark, Ireland, UK 1981 Greece 1986 Portugal, Spain 1995 Austria, Finland, Sweden 2004 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia 2007 Romania

  6. The EU’s “Institutional Triangle” European Parliament: represents the EU’s citizens and is directly elected by them Council of the European Union: represents the individual member states European Commission: seeks to uphold the interests of the whole Union European Regulators' Group for Electricity and Gas: advisory body on internal energy market issues.

  7. Comparative Study: U.S. vs. European Restructuring Models • U.S. Electric Power Markets (clockwise from top) • Northwest • Midwest • New York • New England • PJM (Beige) • Southeast • SPP • ERCOT • Southwest • California

  8. Comparative Study: U.S. vs. European Restructuring Models

  9. Both Driven by Top-Down Political Maneuvering Both Protect Against Price Volatility Both Work to Ensure Sufficient Energy Capacity European Energy Restructuring:The Quest for a Competitive Single Energy Market Similarities between Europe & U.S. Restructuring

  10. Structure of Market Infrastructure/Transmission Management Relative Capability of Facilitating Restructuring Comparative Success of Response to Transmission Discrimination European Energy Restructuring:The Quest for a Competitive Single Energy Market Differences between Europe & U.S. Restructuring

  11. Liberalisation process – Timeline 2nd Liberalisation Package: Directive 2003/54/EC concerning common rules for the internal market in electricity 1st Liberalisation Directive: Directive 96/92/EC concerning common rules for the internal market in electricity Full implementation of 3rd Liberalisation Package? 3rd Liberalisation Package: Proposalsissued on 19th September 1996 2003 2007 20?? Source: Union of the Electricity Industry, Eurelectric

  12. Liberalisation process – Timeline Cross Border Trade Regulation Effective Florence Forum European Regulators Group for Electricity & Gas 1st Electricity Directive: 96/92/EC CEER 1996 1998 2003 2004 2005 Directive on Electricity Security of Supply and Infrastructure 2nd Electricity Directive: 2003/54/EC

  13. European Energy Restructuring:The Quest for a Competitive Single Energy Market

  14. Key Indicators – Single market not working • Significant price differences prevailing in the internal markets • Price difference of more than 100% for industrial users in some cases • Low level of cross border trades • Cross border flows was at 10.7% of consumption at the end of 2004 • Increased only by 2% in 4 years • Prices have been increasing instead of decreasing as part of increased competition in the market • Lack of real competition • Switching by customers remains limited in most Member States • Choosing a new supplier from another Member State remains the exception

  15. Prices in different regions Key Indicators – Single market not working Market share of biggest three producers

  16. Key Indicators – Single market not working

  17. Impediments for single market • Insufficient interconnection between many Member States, leading to congestion • Concentration and consolidation in the industry • Number of newcomers has decreased • Independence of network operators • There is an inadequate unbundling between network and supply activities • Vertical foreclosure • Vertical integration between generation and retail markets • long term power purchase agreements lead to illiquid wholesale markets. • Lack of transparency • Survey shows that 84% people feel that they do not have current market information • Only a few TSOs publish all information related to network access and availability • Lack of FERC like regulatory authority

  18. Impediments for single market • Insufficient interconnection between many Member States, leading to congestion • Concentration and consolidation in the industry • Number of newcomers has decreased • Independence of network operators • There is an inadequate unbundling between network and supply activities • Vertical foreclosure • Vertical integration between generation and retail markets • long term power purchase agreements lead to illiquid wholesale markets. • Lack of transparency • Survey shows that 84% people feel that they do not have current market information • Only a few TSOs publish all information related to network access and availability • Lack of FERC like regulatory authority

  19. What should be done? • Investments in electricity generation and infrastructure • Separate supply and production activities from network operation • Require strong national regulators to oversee the running of electricity and gas markets • Establish an independent mechanism for cooperation and governance among national regulators (FERC-like authority) • Greater transparency in energy market operations • Create mechanism for transmission system operators to improve coordination of networks operation.

  20. European Energy Restructuring:The Quest for a Competitive Single Energy Market Thank you! Questions?

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