Abstract
Member states of the European Union have similar electricity market architectures, but these markets are weakly integrated. There is great potential in improving the links among member state submarkets, making better use of existing grid infrastructure. While investments in grid bottlenecks are necessary, existing regulation is inadequate to ensure and coordinate cross-border transmission investments.
Highlights
In the past, the electricity industry has been organized as vertically integrated monopolies that were sometimes state owned
The Directives refrain from designing a concrete market architecture, the internal electricity market (IEM) consists of 25 Member State submarkets with similar architectures
Wholesale markets are mainly bilateral, but in most Member States, there is the possibility for anonymous auction trade organized by power exchanges one day before delivery
Summary
The electricity industry has been organized as vertically integrated monopolies that were sometimes state owned. Well functioning markets are a critical success factor of the liberalization In many cases, this has triggered public initiative with governments creating mandatory wholesale markets, called power pools. The competitiveness of the energy industry is seriously threatened, which could lead to mistrust of the general public and especially large electricity consumers in the liberalization process in Europe. This problem has been underlined at the last Eurelectric conference in Brussels and needs to be addressed, but is outside the scope of this paper
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