A European Market for Electricity? Monitoring European Deregulation 2

All current members of the European Union, and quite a few hopefuls, are liberalizing their electricity markets. But can Europe achieve a single market for electricity? This Report explores the obstacles to this ambition and the policy choices facing regulators at both the national and EU level. Part 1 of the report analyses the key issues in electricity market integration and liberalization, particularly in the context of the Directive, for which the target date for implementation was February 1999. Part 2 evaluates the practical experiences of the UK, the Nordic countries, Germany, Spain, France and Hungary. These experiences suggest one important lesson: liberalized electricity systems work - the technical breakdowns predicted by the sceptics just have not happened in the EU. Part 3 of the Report draws policy lessons from the experiences of liberalization. The report concludes that access charges are the key to an integrated electricity market and that Europe needs a transmission pricing system where access charges are simple, transparent and only depend on the point of connection; where the allocation of charges between entry and exit points is uniform; and where there is some geographic differentiation of access charges to provide incentives to relieve congestion and reduce overall transmission loss. If these reforms are completed, the single electricity market should become a reality. 'Monitoring European Deregulation 2 is a fascinating and richly detailed guide to the labyrinth of electricity reform in the European union. It is a valuable reference, from an all-star team of researchers.' (Richard Gilbert, University of California at Berkeley)