Development of European energy market Essay Example | Topics and Well Written Essays - 1250 words

Development of European energy market - Essay Example Power generation, its trade and supply are opened to competition. However, network activities such as lower voltage distribution and high voltage transmission are still regulated by national monopoly. The liberalization started as a result of Electricity Market Directive of 1996. By the year 2000 most of the member states implemented the liberalization package. But some members especially France and Germany did not agree with these policies (Prospects for the internal gas and electricity, 2007). The Directive of 1996 was updated later, in the year 2003. The legislation ensured security of supply, efficient operation of power generation plants, efficient network access, access to storage, and transparency in the dealings of all member countries and thus facilitated a fully open energy market to all member countries. The industrial markets were opened up for competition by July 2004. By 1st July 2007, all the household users also had access to the open market and both industrial and ho usehold customers could select a provider of their own choice in the competitive market. This resulted in price reduction, increase of reliability and better quality service to all customers. Based on the legislation in 2003, national regulatory bodies were set up in each country to oversee the monopolies and European Regulators Group for Electricity and Gas (ERGEG) was set up to give advice to the European Commission to implement liberalization package more effectively (Liberalising the EU energy sector, 2009). European Commission conducted an inquiry in the market in January 2007 to study the nature and effect of open market and found that the structure of the market is still the same as old monopoly structure. It was dominated by companies which had both power generation as well as its transmission under their hold and therefore could control the prices. They prevented the entry of new companies into the market. This became one of the biggest obstacles for the complete impletion of liberalization package (Talus, 2008). Other major issues in the field, which still needed attention, are large-scale investments to set up more power generation plants and to increase the transmission capacity and the integration of overall electricity system. The third package of proposal for energy sector legislation is presently under discussion and this involves updating of the directives on electricity and gas, regulations of cross-border trade of electricity and gas and the establishment of a Cooperative Agency for Regulators. The key factors in the proposal, which was published on 19th September 2007, are the following (A competitive market, 2009): According to this proposal in order to ensure better competition the energy production sector has to be separated from the supply section. This would facilitate easy access to the market for competition. The proposal has put forward two options for the companies for this procedure. One is ownership unbundling in which the compan ies that deal with both power generation and its transmission has to sell part of its assets.