Competition in Electricity Markets

INTRODUCTION AND EXECUTIVE SUMMARY

Virtually All OECD Countries Are Implementing Electricity Market Reforms

Virtually all OECD countries have decided to open up their electricity markets, at least to their large industrial users. In many cases, electricity markets will be open to all users, including households.

Key Trends and Challenges

1. Consumer Choice: Consumer choice of electricity suppliers is becoming a fundamental pillar of effective reform.
2. Stimulating Competition: Competition needs to be stimulated not just in generation but also in electricity trading and supply services to consumers.
3. Regulatory Frameworks: There is a need for an overhaul of traditional market structures and regulatory frameworks to accommodate competition.
4. Security and Environment: Reform also has significant implications for security and the environment, but this is not the primary focus of this book.

Background to Reform

• Defining Electricity: Electricity is defined in various ways across different countries.
• Benefits of Reform: Reform can lead to higher efficiency and better resource allocation.
• Costs of Reform: There are both direct and indirect costs associated with implementing reforms.
• Drivers of Reform: Various factors drive the push for reform, including economic and environmental considerations.

Overview of Electricity Sector Integration (ESI) Reforms in OECD Countries

• History and Early Reforms: A brief history of early reforms.
• Recent Reforms: Recent reforms and their performance.
• Models for ESI: Different models for electricity sector integration, including retail competition and alternative approaches.

Key Issues in Reform

1. Unbundling: Vertical separation of generation and transmission, generation and distribution, and distribution and end-user supply.
2. Empowering the End User: Strategies to enhance consumer participation and choice.
3. Meeting Security of Supply, Environmental, and Social Goals: Balancing economic, environmental, and social objectives.
4. Reforming Regulatory Institutions: Adapting regulatory institutions to oversee new markets.

Designing Markets and Regulation

• Markets: Overview of "spot" electricity markets, power exchanges, and capacity mechanisms.
• Networks: Regulation and pricing of transmission networks, institutional frameworks for system operators.

Broader Policy Framework

• Relationship with Natural Gas: Integration of natural gas markets.
• Security of Supply: Ensuring reliable and secure energy supply.
• Environmental Considerations: Addressing environmental impacts.
• Social and Regional Objectives: Promoting social and regional goals.

Conclusions and Outlook

• Consumer Choice: Consumer choice is crucial for successful reform.
• Challenges: Ongoing challenges and future directions.
• Expected Changes: Further changes can be expected as the market continues to evolve.

Key Data Points

• OECD Membership: The OECD includes 30 member countries, with additional countries joining through accession.
• Electricity Market Reforms: Many OECD countries have implemented or are implementing reforms to introduce competition in their electricity markets.
• Unbundling: Vertical separation of activities such as generation and transmission, generation and distribution, and distribution and end-user supply.
• Retail Competition: Stimulation of retail competition in electricity markets.
• Security and Environment: Significant implications for security, environment, and social goals.
• Regulatory Institutions: Adaptation of regulatory institutions to oversee new markets.

This summary provides a comprehensive overview of the key aspects and data points discussed in the report on electricity market reforms in OECD countries.