Unbundling Europe’s Electric Utilities

Michael Giberson

A great deal of energy is currently being expended in Europe debating the merits of further unbundling of vertically-integrated electric utilities in the EU. “This is unfortunate,” said Jean-Michel Glachant and François Lévêque, in a post on the EU Energy Policy Blog, on two grounds. First, because the economics of the matter are fairly settled and favor unbundling, and second, the topic isn’t the most pressing current issue.

In general Glachant and Lévêque assert that the benefits of vertical integration have already been lost, and that the current vertical systems – mostly limited by country boundaries – impedes more effective transmission system coordination across the continent. They write, “The optimal industry structure for electricity transmission in Europe does not correspond to 33 transmission grid companies. Cross-border alliances, mergers and acquisitions would improve the management system operating.” Such cooperation among transmission systems would be facilitated by a divorce between transmission and generation.

But, in their view unbundling does not deserve the spotlight, it is a second tier issue. They said, “Improving the management of interconnections and balancing services, reinforcing regional cooperation of TSOs and planning their joint investments, making national regulators working and thinking pan-European, and setting a market surveillance committee come first.”

5 thoughts on “Unbundling Europe’s Electric Utilities

  1. Hasn’t this process already started? I mean, we have Gazprom trying to get into the energy market and working with German North-Eastern energy companies and we also have (for a long time) good relationships between EnBW and Swiss, also EnBW has been bought to a point by the EDF (French energy company). So, we are already doing cross-national energy projects and we are already working to export it as far as Northern-Africa.

    As a costumer I am really satisfied with the service and the over-all performance of the electricity network (actually down time is almost zero). However, one of the few problems is more a policy than an economic issue:

    a) we still have too many taxes that are economically bad on energy and

    b) we will be energy dependent in Germany from other nations due to the closing of nuclear power plant, which will be a blow not only to the German energy grid, but also to neighbouring countries. I doubt that opening up cross-national energy transfers would help much in this case…

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