European energy market liberalization: experiences and challenges

Abstract

The European electricity market liberalization process started more than 20 years ago, one of its main purposes being to organize the provision of electricity and gas more efficiently by introducing competitive forces where possible and regulation where needed. Despite the fact that most Member States of the European Union (EU) have liberalized their electricity market, a European internal market for electricity—one of the ultimate goals of EU energy policy—has not been realized yet. For this to be realised a number of remaining obstacles need to be removed. This paper gives a brief overview of the EU electricity market liberalization process and surveys the main remaining issues and challenges. At the retail market level, additional efforts are required to increase retail competition and to remove regulated retail prices. Also, more effort is required to physically integrate existing regional electricity markets, by removing the existing barriers between regions and countries. Building new interconnection capacity and improving the allocation procedures for cross-border capacities can help achieving this. Furthermore, the EU should increase efforts to further harmonize and integrate electricity markets and electricity market policies and to encourage the demand-side of the market to participate more intensively through demand response.