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IBUS case study: EU Energy Market

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Kirsty Dent

on 22 August 2013

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Transcript of IBUS case study: EU Energy Market

Economic Benefits of Liberalization
-greater competition

EU Energy Market
-Jazel, Christine and Kirsty

Liberalization and the EU
Question 2
Question 3
Why is it important to deintegrate large energy companies ?
Q2: Implications of Liberalization
· Firms are restricted from monopolizing the markets by producing, transmitting and selling power at the same time.

· Trade diversion is the potential issue for liberalization.

· Liberalization may cause property right violation to enterprises.
The European
Energy Market:

National Differences in Political Economy and Differences in Culture

Economic Benefits of Liberalization
Goal of Liberalizing
-list all the benefits that apply.
Improve efficiency of the energy market
Increase competitiveness of the industry
benefits of liberalization
Before deintegration
Existence of 'national' energy providers
- Often vertically integrated
Without deintegration:
-Inefficient Market
-Increase cost of production
With Deintegration
Facilitates competition and innovation in the industry
Improves liquidity of trades
Increases quality of service and affordability
Benefits EU but implicates producers
Helps develop and improve EU's production of energy
Environment of post-liberalization
· Many acquisitions and mergers;
· Greater price competition;
· EC is increasingly attempting to intervene and impose conditions on companies proposing mergers and acquisitions.
· Comply with the conditions;
· Improve technological and supply management;
· Porter's Five Forces analysis;
· Obtain competitive advantage
Actions for producers
The European
Founders: Belgium, France, Germany Italy,
Luxembourg and the Netherlands
European Coal and Steel 1950

Six years later - European Atomic Energy Community

Past two decades - liberalise energy market
replacing 28 markets with one single continent-wide market

Increase competition across national borders,
What is liberalization?

Why would the EU decide to liberalize their Energy Market ?

Who stands to benefit more
Consumer vs Producer ?

Greater competition
stimulate economic growth
Foreign Direct Investment
No government dictation - only benefits consumers!
Better prices for consumers
"privatizing state-owned electricity companies, separating competitive segments and restructuring generation and transmission to create a public wholesale energy market"
Implications for Individual Countries
More countries, more opinions,

E.ON vs Endesa

Cross-border takeover bids threatening "national energy companies"
Provide a consumer-friendly energy market
In response to liberalization...
Take overs of 'national' companies
---> Faced with political opposition due to national interest
E.g, Take over of Endesa (Spain)
by E.ON (German)
Full transcript