Electricity reform in Europe: towards a single energy market

Abstract

This important volume of essays is the outcome of a European project titled ‘Sustainable Energy Specifi c Support Assessment (SESSA)’ that aims to create a well-functioning internal electricity market in the European Union (EU). In the foreword, Paul Joskow states, “I believe that the ultimate goal of electricity liberalization initiatives should be to create new governance arrangements for the electricity sector that yield longterm benefi ts to society, by increasing the effi ciency with which electricity is produced and consumed, in ways that are consistent with environmental goals and policies. These benefi ts are to be realized by relying on competitive wholesale markets for power to provide better incentives for controlling construction and operating costs of new and existing generating capacity, to encourage innovation in power supply technologies, and to shift the risks of technology choice, construction cost, and operating ‘mistakes’ to suppliers, and away from the consumers.” Also, effective liberalization programmes will still leave a signifi cant portion of the total costs of electric supply – distribution and transmission – subject to regulation. Accordingly, reforming traditional regulatory arrangements governing the distribution and transmission networks has, generally, been viewed as an important complement to the introduction of wholesale and retail competition to supply consumer needs. The above two statements set out the overall agenda of the book with great clarity. Joskow also presents the main elements of restructuring the ‘grammar’ of policy. Among these, vertical separation of competitive segments such as generation, marketing, and retail supply from regulated segments such as distribution, IJRG IJRG June 2010 Book review