The 2006 reviews of the electricity and gas directives

This report reviews the investigations by DG TREN and DG Competition into the electricity and gas markets of Europe

The Spanish Electricity Industry: Plus ca Change

Working paper públicado por el Instituto de Economía Industrial. serie nº 317,IDEI Working papersIn this paper we describe the Spanish electricity industry and its current regulatory regime. Special emphasis is given to the description and discussion of market design issues (including stranded cost recovery), the evolution of market structure, investment in generation capacity and network activities. We also provide a critical assessment of the 1997 regulatory reform, which did not succeed in introducing effective competition, but retained an opaque regulation which has been subject to continuous governmental interventionism. Furthermore, the implementation of the Kyoto agreement could show the lack of robustness of the regulatory regime

Vertical foreclosure: a policy framework

Whenever you phone your mother, switch on the light, or buy health insurance you purchase a service or product from a chain of vertically related industries. Providers of these products or services need access to a telecommunications network, an electricity network or to health care services. In such industries, integration and exclusive contracts between vertically related firms may have important welfare enhancing effects, but can also deny or limit rivals' access to input or customers, leading to foreclosure. Foreclosure can harm welfare if it reduces competition. This document provides policymakers with a framework to assess the potential for welfare reducing foreclosure of vertical integration and vertical restraints and describes possible remedies. The framework consists of four steps. Each step requires its own detailed analysis. First, market power should exist either upstream or downstream. Second, a theory of foreclosure should be formulated that explains why foreclosure is a profitable equilibrium strategy. Third, the existence and magnitude of potential welfare enhancing effects of the vertical restrains or vertical integration should be assessed. Fourth, suitable policies to address foreclosure should be found.

Fair pricing for power

This report recommends a change to the way consumers pay for the network that carries electricity from generators to homes, so that it better reflects the cost of running the network. Overview Australians are paying too much for power. In the five years to 2013, the average household power bill rose 70 per cent: from $970 to$1660 a year. The prices we pay are also unfair: some people are paying more than their fair share. These consumers are paying on average about $150 a year more than they should to subsidise other consumers. To get fairer and cheaper prices, network tariffs need urgent reform. Electricity networks transport power from generators to our homes and businesses. Like roads and freeways, they are built at a size to keep electricity moving at times of maximum demand – peak hour. Yet the price we pay to use electricity networks is the same whatever the time of day or season. The price therefore provides no incentive to use the network efficiently by avoiding peak times. It also provides little incentive for network owners to invest efficiently because it is unrelated to their main cost: building enough infrastructure to meet peak demand and avoid blackouts. Network owners spent$17.6 billion on expanding power networks between 2009 and 2013. If prices had encouraged consumers to use less power in periods of peak demand, $7.8 billion of this investment could have been avoided and the savings passed on as lower power bills. It is widely agreed that reform is needed. Yet there is a lack of specific proposals to improve the structure and operation of network tariffs. This report, the third in a series of Grattan reports on the excessive cost of electricity, fills that gap. It proposes two major reforms to the way network companies charge customers for the cost of carrying power to homes and small businesses. First, the 43 per cent of the consumer bill that goes to fund the network should no longer be based on total energy use. Instead, consumers should pay for the maximum load they put on the network. This tariff is called a capacity-based charge because it is based on the capacity of the infrastructure that must be built to carry this maximum load. A capacity charge far better reflects the cost of building and running the network. Yet this reform alone may not reduce peak demand in areas where the network is under pressure. Therefore the report also proposes the introduction of a new tariff in areas that - in the absence of prices that better reflect the cost of running the network - will require expensive infrastructure upgrades. Under this tariff, consumers will be charged more for use during times (usually in summer) when the network is under most strain. Because these periods drive total investment in infrastructure, reducing peak demand levels ultimately leads to lower prices. These reforms will give all consumers incentives to use electricity more efficiently. When they do, the pressure on network companies to invest in infrastructure will fall, and power prices with it. But governments must commit to these reforms and carefully explain their benefits. Advanced electricity meters will need to be installed on most Australian homes, at material shortterm cost. Politicians may decide it is too hard. But if they do, they will miss an opportunity to deliver cheaper and fairer power prices. &nbsp

The Spanish Electricity Industry: Plus ça change …

In this paper we describe the Spanish electricity industry and its current regulatory regime. Special emphasis is given to the description and discussion of market design issues (including stranded cost recovery), the evolution of market structure, investment in generation capacity and network activities. We also provide a critical assessment of the 1997 regulatory reform, which did not succeed in introducing effective competition, but retained an opaque regulation which has been subject to continuous governmental interventionism. Furthermore, the implementation of the Kyoto agreement could show the lack of robustness of the regulatory regime.Spain, electricity, market design, generation, network activities, regulation

Free entry in infrastructure

With a policy of free entry, individuals, firms, or community groups who wish to supply power, water, and sanitation services can do so with minimal legal restrictions. Free entry is the opposite of"exclusivity"or"legal monopoly". Free entry is allowed in most industries, but governments usually allow only one provider of power, water, and sanitation in any given area. This is supposed to prevent wasteful duplication and ensure a supply of essential services to poor and marginal areas. But monopoly water and power utilities often operate at high cost, lack funds to invest, and provide low-quality, unreliable service. Worse, poor and marginal areas are often unserved. When the monopoly model doesn't work, it is time to look at alternatives. The authors provide examples of alternative solutions in developing countries: *In Karachi, Pakistan, the Orangi Pilot Project provides sanitation in an unplanned settlement. Roughly 800,000 working class people lived in an area where sanitary conditions were medievaland a long-hoped-for sewerage system never came. Starting in 1980, a charitable group developed a low-cost approach to piped sanitation, explained the technology to the community, and catalyzed community action. Householders and neighborhoods funded the construction of household pourflush latrines and sewerage lines. * In Paraguay, 300 to 400 private individuals and aguateros supply good quality piped water to areas unserved by the public water company. Unlike the public company, the aguateros allow payment of connection fees on installment, making it easier for low-income consumers to connect. * In Yemen, small-scale electricity providers innovatively meet the rural and village demand for electricity that the public utility does not meet. These entrants seldom duplicate investments, although some government intervention to ensure interconnection could improve efficiency. Limitations on entry may sometimes be justified for environmental reasons or to promote private sector investment, but those cases are rare. Legalizing alternative providers will allow them to expand and meet new needs. Limits on their entry may be needed sometimes, but limits should be the exception, not the rule, the authors argue. Generally, free entry should be allowed in power, water, and sanitation.Health Economics&Finance,Decentralization,Water and Industry,Economic Theory&Research,Environmental Economics&Policies,Town Water Supply and Sanitation,Environmental Economics&Policies,Health Economics&Finance,Water and Industry,Economic Theory&Research

Take or Pay Contracts and Market Segmentation

This paper examines competition in the liberalized natural gas market. Each .firm has zero marginal cost core capacity, due to long term contracts with take or pay obligations, and additional capacity at higher marginal costs. The market is decentralized and the firms decide which customers to serve, competing then in prices. In equilibrium each .firm approaches a different segment of the market and sets the monopoly price, i.e. market segmentation. Antitrust ceilings do not prevent such an outcome while the separation of wholesale and retail activities and the creation of a wholesale market induces generalized competition and low margins in the retail segment.Entry, Segmentation, Decentralized market

Emerging business models in local energy markets: A systematic review of peer-to-peer, community self-consumption, and transactive energy models

The emergence of peer-to-peer, collective or community self-consumption, and transactive energy concepts gives rise to new configurations of business models for local energy trading among a variety of actors. Much attention has been paid in the academic literature to the transition of the underlying energy system with its macroeconomic market framework. However, fewer contributions focus on the microeconomic aspects of the broad set of involved actors. Even though specific case studies highlight single business models, a comprehensive analysis of emerging business models for the entire set of actors is missing. Following this research gap, this paper conducts a systematic literature review of 135 peer-reviewed journal articles to examine business models of actors operating in local energy markets. From 221 businesses in the reviewed literature, nine macro-actor categories are identified. For each type of market actor, a business model archetype is determined and characterised using the business model canvas. The key elements of each business model archetype are discussed, and areas are highlighted where further research is needed. Finally, this paper outlines the differences of business models for their presence in the three local energy market models. Focusing on the identified customers and partner relationships, this study highlights the key actors per market model and the character of the interactions between market participants

Multi-energy retail market simulation with autonomous intelligent agents

Tese de doutoramento. Engenharia Electrotécnica e de Computadores. 2005. Faculdade de Engenharia. Universidade do Port