Liberalisation of the Internal Energy Market


ithin the context of the liberalization of the internal energy market, the European Union aims at fully integrating national energy markets by 2014, while at the same time boosting competition, securing supply in order to deliver competitive prices and more choices for consumers and provide a favourable investment climate so as to incentivize research and deployment in new technologies and infrastructure.

All these challenges require, however, a comprehensive legal framework, which regulates each segment of the energy market at sectoral level and clearly defines the role of all the different players involved, including producers, network operators, demand-response providers, suppliers and consumers.

The process of creating competitive Europe-wide electricity and gas markets started in 1992, when the Commission formally proposed the first electricity and gas Directives. Prior to this effort, public energy utilities (amongst others) were run by state-owned monopolies enjoying the exclusive right to provide citizens with energy. The Commission started to challenge those rights on the ground that they created a huge barrier to the market integration. In this context, the Commission took advantage of the Articles of the Treaty of Rome relating to Competition Law to force member states abandon this monopolistic structure and open the market to competition.

Due to the particularities of the supply of energy products and the fact that each segment of the energy market operates under different circumstances, this "opening" of the market cannot be implemented without restrictions. The continued supply of electricity and gas is essential. This supply is inextricably linked to the network infrastructure. The construction and operation of the network is usually a natural monopoly and even if network duplication is possible from a legal view point, as is often the case nowadays, it is not feasible or viable in economic terms. Finally, taking into account that in the past in almost all EU member states electricity and gas have been supplied by vertically integrated companies owning production facilities as well as the transmission and distribution networks, it is obvious that introducing effective competition in the market is not an easy task.


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