SINGLE EU ENERGY MARKET
Filip Černoch
FSS MU
Energy policy of the EU
Single energy market
 SEM: trade area with common policies on product regulation and free
movement of energy, where the maximum competition between suppliers
and providers of different types of energy is essential. The barriers among
the MS are, therefore, removed to maximum.

 1) Market liberalisation
 2) Interconnections
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Liberalization
 Economic liberalization: refers to fewer govt. regulations and restrictions
in the economy in exchange for greater participation of private entities.
Arguments for economic liberalization include greater efficiency and
effectiveness that would provide greater profit for everybody. Thus,
liberalization in short refers to the removal of controls, to encourage
economic development. (wiki).
 Advantages of liberalized (= competitive) market:
 Allocative efficiency
 Innovation
 Cost reduction
 …
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.
Liberalization – pros and cons in en. sector
 Prices are set by the market and competition drives prices lower vs market
pricing
 Consumers pay the actual price of energy vs some customers may not be able
to afford such costs (public servise obligation)
 - Stress on profit may weaken the incentives to some investments
 - Companies are not cocerned about public or state interests
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.
Traditional vs liberal paradigm
 Traditional paradigm emphasizes stability, reliability of supply, and public
service, it is a model of technical organization involving the central control
over a synchronized network.
 The term refers not only to the certain ways of organizing government
relations with electricity and gas industries, but also to a set of ideas about
the scope of competition and the appropriate legal and institutional methods
to achieve public policy aims.
 Liberal paradigm stresses a greater reliance on markets. It sought to
introduce competition whenever possible, encouraging openness,
decentralized production with network access, and profit based on the
market prices, not costs. (regulation for competition).
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Liberal paradigm
 Some basic characteristic:
 Separation of activities in order to facilitate the introduction of
competition wherever possible (unbundling)
 Freedom of entry and freedom of investment into competitive activities,
instead of a centrally-planned approach
 Freedom of contract and competitive formation of prices
 Access to the network and infrastructure
 Supervision of the model by an independent regulator
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Specific features of gas and electricity industry
 Networks: natural monopoly is a monopoly in an industry in which it is
most efficient for production to be concentrated in a single firm. This gives
the largest supplier in an industry, often the first supplier in a market, an
overwhelming cost advantage over other actual and potential competitors.
 Some specific characteristic of electricity:
 Lack of storage potential
 High cost of outages
 Fluctuation
 Lack of import dependence (in the EU) – but interconnectors are poor and missing
 Some specific characteristic of gas:
 Geopolitics
 Gas chain
 Storage and timing of actions
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First initiatives for SEM
 Four basic principles in energy policy
 A gradual approach (to enable industry to adust to its new competitive
environment)
 A degree of subsidiarity to enable MS to choose the systém they feel fits their
situation best
 The avoidance of excessive regulation
 Continuing political dialogue with the Council, EP, ECOSOC. (Klom, A.M.) .
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First initiatives for SEM
 1988 Working Document on the Internal Energy Market
 „…the greatest possible transparency with regard to potential
obstacles“.
 First activities of the Commission date from 1989.
 Communication from the Commission: Transparency of consumer energy
prices. COM (89)123, 1989
 Towards completion of the internal market for natural gas. Communication
from the Commission. Proposal for a Council Directive on the transit of
natural gas through the major systems. COM (89) 334, 1989
 Increased intra-Community electricity exchanges: a fundamental step towards
completing the internal energy market. Proposal for a Council Directive on
the transit of electricity through transmission grids. COM (89) 336, 1989.
 And the others …
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First liberalization package
 Directive 96/92/EC of the European Parliament and of the Council of 19
December 1996 concerning common rules for the internal market in
electricity
 Directive 98/30/EC of the European Parliament and of the Council of 22
June 1998 concerning common rules for the internal market in natural gas
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Unbundling
of networks
Access to
networks
Market
opening
National
regulation
First
legislative
package
Separate
management
and accounts
Negotiated
or regulated
terms of
access
Power: 35%
open by
2003
Gas: 33%
open by
2018
Mechanism
for regulation