Cross-Border Trade in Electricity and Gas. Obstacles to Effective Competition from a Regulatory Standpoint*

Abstract

Cross-border trade in electricity and gas faces various obstacles such as ineffective transmission system operator unbundling and lack of sufficient interconnection capacity. The latter obstacle often results from long-term reservation agreements dating back to pre-liberalisation times, which may lead to market foreclosure. Additionally, cross-border coordination between national regulatory authorities is underdeveloped. All of these factors slow down the process of market integration, making the goal of establishing an internal energy market in the near future appear unrealistic. In January 2007, the European Commission proposed a package of measures to establish a new energy policy for Europe, which may bring the whole liberalisation process back on track.