Parent Category: Economics, Geopolitics & Geography - Category: Economics
The Liberalization of the electricity market took place in the early 1990s. Before the Liberalization of the market all activities carried on by a state monopoly. After the Liberalization, there is clear separation of activities and the entrance of privates.
Neo-liberalism is a modern ideological and political expression of economic liberalism. The liberal-modernist thinking has influenced all ideological hues and it supports the superiority of the market. Simultaneously, the growing demand for electricity has the clearest conclusion that the old, large-scale power plants were not economic efficient, and the prospects opened up by the smaller and decentralized cogeneration units were more than encouraging.
The establishment of the internal market in electricity is particularly important to increase efficiency in production, transportation and distribution of electricity, while enhancing security of supply and the competitiveness of European economy with respect to the environmental protection. There were established, under the principle of subsidiary, general authorities for the organization of energy markets at the EU level, but the definition of specific terms application were left to Member States which had decided which best suited to their particular situation status.
There are three packages for the liberalization of electricity markets. The first package for the liberalization of electricity market was adopted at 19 December 1996 with the Directive 96/92/EC. This Directive establishes common rules for the generation, transmission and distribution of electricity. It lays down rules on the organization and conduct of electricity, market access, criteria and procedures applicable to
tendering, licensing and exploitation of networks. The completion of a competitive electricity market is an important step towards completing the internal energy market.
The Directive 2003/54/EC, which has introduced the second package for the liberalization of electricity market, emphasizes that fair and impartial access to network is needed as far as the appropriate transmission and distribution systems (vertically integrated enterprises with a distinct legal personality) and finally it is crucial to ensure the independence of transmission system operators and distribution over the producers and suppliers.
The third package for liberalization of the electricity market includes Directive 2009/72/EC and the Regulation 714/2009 on conditions network access for cross-border exchanges in electricity and Regulation 713/2009 establishing the Organization for Cooperation of Energy Regulatory Authorities. This Directive repealed at 3/3/2011, the previous directive 2003/54/EC.
The third energy package in 2009 was considered as the completion of the internal EU energy market and it is supposed to separate the production from distribution, transportation and delivery.
This package "was introduced to reduce energy prices," said Johannes Kleis from the European Organization of Consumers, but we see the prices to get increased in a lot of countries. In countries like the UK, the price of energy for households was increased approximately 140% since 2004, with a percentage of about 90% only in the last 6 years.
Furthermore, at the beginning of its existence the Commission believed that liberalization would increase competition; it would prevent monopolies and would bring benefits in the wallet of consumers.
"We know that markets bring the best prices and best services," said the Commissioner for Energy Andris Piebalgs in 2007. ‘’You really need to create competition in order to reduce prices’’.
But professors such as Stephen Thomas of the University of Greenwich said that the third package has led the EU in the wrong direction. He had also referred, at EurActiv that "The third package focused on wrong things, and it completely ignores the real problem of integration of production and retailing of energy."
The proposals of the third package have caused a storm of reactions, namely at the issue of "ownership unbundling" of the distribution system, i.e. the separation of large vertically integrated energy companies, which controlled both electricity generation and distribution facilities.
France, Germany and 6 other Member States were revealed their resistance at the separation plans. They drew together an alternative proposal in February 2008, and they claimed that it guarantees a similar result without forcing companies to separate the generation and transmission of energy.
Nowadays, the Greek electricity market, both in production and supply level, presents a picture of systemic instability, so there is a real need of designing and implementing, a strategy and a plan with effective and transparent liberalization of the electricity market. "The institutional framework of the electricity market in Greece is not right and it should be reviewed urgently in order to be avoided the devaluation of the Public Power Corporation (PPC) in Greece. The market practices allowed limits of speculation". With these words, the former head of PPC, Mr. Athanasopoulos called in 2009 the Greek Parliament to intervene and correct the distortions of the electricity market, warning of the inevitable consequences.
And the story goes on….