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The European Energy Market

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James Spruce

on 1 October 2014

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Transcript of The European Energy Market

The European Energy Market
Liberalization of the European Energy Market
Liberalization generally means the removal or relaxation of the previous governments restriction, usually in such areas of social, political, or economic policy.
Electricity market liberalization aims to boost competition at the level of each member state as well as within the European Union (EU).
The Single Market allows people and business to move and trade freely across borders within the EU. It initially opens to 345 people in 1992 and now can accessed by over 500 million people in 27 EU Member States.
What do you think are the economic benefits of liberalizing the EU Energy Market?
Who stands to gain the most from liberalization?
Trade Flows Between Intra-EU
Trade Flows Over Countries Outside EU
Greater Employment Opportunities!
In the proposal of “20 years of the Euporean Single Market” there’s an average amount of 500 pounds extra in income per person in 2008 alone.
Over the same period, the Single Market helped to create 2.77 million new jobs and a increase of 1.3% in total EU employment.
Increase investment from foreign investors
Who stands to gain the most from liberalization?

-Gain more business opportunity

-Become more productive & profitable

-Lower possible price

-Better protection & rights
What are the implications of liberalization for energy producers in the EU?

How will the environment they face change post liberalization?

What actions will they have to take?
Implications of liberalization for energy producers in the EU
Increased competition
Increased cost pressure
Companies adopt competitive pricing
Produce cost-efficient products
Decreased price directly benefit consumers

More competition and better services in the European Energy Market
Changes of environment post liberalization
More job opportunities
Numerous acquisitions and mergers will take place in the market
Every government will take various measures by imposing conditions and regulations in order to protect the national firms from being taken over by the competitors
E.g. Spanish largest utility Endesa was imposing stringent conditions to block being acquired by E.ON, German largest utility in 2006
Actions of the energy producers in the EU
Companies would have to gear up for the competition
Companies have to re engineer their business process to make it to accommodate low cost revenue generation activities
Producers would focus on its core activities such as the price and quality of the products and services provided to the end users

Why is the de-integration of large energy companies seen as such an important part of any attempt to liberalize the EU energy market?
Separation of vertically integrated utilities
Amount of Competition

Price of Energy to Consumer
sourced: http://tutor2u.net/economics
De-integration of the larger energy companies will open up gaps for smaller companies to buy into the market
Source: CEER (2004)
Companies that control both energy generation and transmission would be obliged to sell part of their assets in whats known as 'ownership unbundling'.

Companies involved in energy production and supply would be allowed to retain their network assets, but would lose control over how they are managed.
Distinguish clearly between competitive parts of the industry (e.g. supply to customers) and non-competitive parts (e.g. operation of the networks)

Oblige the operators of the non-competitive parts of the industry (e.g. the networks and other infrastructure) to allow third parties to have access to the infrastructure

Free up the supply side of the market (e.g. remove barriers preventing alternative suppliers from importing or producing energy)

Remove gradually any restrictions on customers from changing their supplier

Introduce independent regulators to monitor the sector

Thank You for listening!
Presented by Hyein, James and Shaneal
De-integration also helps reduce the trade barriers of power between countries in EU
Ultimately, how will de-integration help with the liberalization of the market?
Full transcript