christopher burleson leslie kay ritchie jitesh sharma european energy restructuring: the quest for a...

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

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Page 1: 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

Page 2: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Presentation:1. Overview of EU and Restructuring Vision

2. Comparison of European Restructuring to U.S. Restructuring

3. Timeline: Implementation of EU Directives & Description of EU Energy Stakeholders

4. Impediments to Single Market & Recommendations

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

Page 3: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

• EU Vision:

– To liberalize the electricity markets into a single, internal competitive model

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

Page 4: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma 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.

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

Page 5: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

27 Member States of the EU

1958Belgium, France, (West) Germany, Italy, Luxembourg, Netherlands

1973Denmark, Ireland, UK

1981Greece

1986Portugal, Spain

1995Austria, Finland, Sweden

2004Cyprus, Czech Republic, Estonia, Hungary,Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia

2007Romania

Page 6: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

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

The EU’s “Institutional Triangle”

European Regulators' Group for Electricity and Gas:

advisory body on internal energy market issues.

Page 7: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

• U.S. Electric Power Markets (clockwise from top) – Northwest– Midwest– New York– New England– PJM (Beige)– Southeast– SPP– ERCOT– Southwest– California

Comparative Study:

U.S. vs. European Restructuring Models

Page 8: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Comparative Study:

U.S. vs. European Restructuring Models

Page 9: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Similarities between Europe & U.S. Restructuring

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

• Both Driven by Top-Down Political Maneuvering

• Both Protect Against Price Volatility

• Both Work to Ensure Sufficient Energy Capacity

Page 10: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Differences between Europe & U.S. Restructuring

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

• Structure of Market

• Infrastructure/Transmission Management

• Relative Capability of Facilitating Restructuring

• Comparative Success of Response to Transmission Discrimination

Page 11: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Liberalisation process – Timeline

1st L

iber

alis

atio

n D

irect

ive:

Dire

ctiv

e 96

/92/

EC c

once

rnin

g

com

mon

rule

s fo

r the

inte

rnal

mar

ket i

n el

ectr

icity

2nd L

iber

alis

atio

n Pa

ckag

e:

Dire

ctiv

e 20

03/5

4/EC

con

cern

ing

com

mon

rule

s fo

r the

inte

rnal

mar

ket i

n el

ectr

icity

3rd L

iber

alis

atio

n Pa

ckag

e: P

ropo

sals

issu

ed o

n 19

th Sep

tem

ber

1996 2003 2007 20??

Full

impl

emen

tatio

n of

3rd L

iber

alis

atio

n Pa

ckag

e?

Source: Union of the Electricity Industry, Eurelectric

Page 12: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Liberalisation process – Timeline

1996

European Regulators Group for Electricity & Gas

European Regulators Group for Electricity & Gas

2003

1st Electricity Directive: 96/92/EC

1st Electricity Directive: 96/92/EC

2nd Electricity Directive: 2003/54/EC

2nd Electricity Directive: 2003/54/EC

CEERCEER

Florence Forum

Florence Forum

1998 2004

Cross Border Trade Regulation Effective

Cross Border Trade Regulation Effective

2005

Directive on Electricity Security of Supply and

Infrastructure

Directive on Electricity Security of Supply and

Infrastructure

Page 13: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

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

Page 14: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

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

Page 15: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Key Indicators – Single market not working

Prices in different regions Market share of biggest three producers

Page 16: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Key Indicators – Single market not working

Page 17: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

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

Page 18: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

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

Page 19: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

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.

Page 20: Christopher Burleson Leslie Kay Ritchie Jitesh Sharma European Energy Restructuring: The Quest for a Competitive Single Energy Market

Thank you!

Questions?

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