Power trading in Europe, what it is and what it is likely to become
In the last 10 years, the Electricity Supply Industry (ESI) on the European mainland had to face a situation of unprecedented oversupply. Now, it is in the middle of a new challenge called deregulation. The goal of this paper is to describe how power trading occurred up to now and how it is likely to evolve in the future, bearing in mind that the over-supply will not disappear during the process of deregulation. Up to now, the ESI was characterized by big companies, which were mostly state-owned and which had a monopoly on sales within a well defined area. Power was offered as an integrated good to final customers, i.e. these companies acted as generators, transmitters and distributors. As a result, Europe was scattered with several companies that basically were similar in their functions, resulting in no incentives to promote competition on the domestic markets. Nevertheless, these interconnected companies have been trading power for a long time and for huge amounts. As they have not been tied by monopoly agreements, trading has been taking place in a highly competitive environment. An increasing number of final customers will have access to a free market where they will choose their suppler. As a result, a variety of different companies will appear which will no longer share the same goals. Moreover, the situation of over-supply will continue. Hence, one can expect fierce competition and thus lower prices in order to attract customers. As a result of the increased competition, profit margins will decrease, creating a need for risk-management. In the meantime, one can expect differing situations in different countries. Even within one country, customers will not have equal access to the market. These inequalities will result in opportunities for arbitrage for those players able to spot them. For this reason one can expect that in fact the deregulation will take less time that what is legally foreseen.
- Research Organization:
- Elektrizitaets-Gesellschaft Laufenburg AG (CH)
- OSTI ID:
- 20018791
- Report Number(s):
- CONF-9806214--
- Country of Publication:
- United States
- Language:
- English
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