EU energy market still not fully competitive

26 April 2007

The European Commission has published a detailed study concluding that wholesale electricity prices are significantly higher than would be expected on perfectly competitive markets with the differences highest when only a few generators are needed to meet demand, especially at peak time..

The report, carried out by an external consultant, broadly supports the conclusions of the Commission’s energy sector competition inquiry that competition in EU wholesale electricity markets is not yet functioning properly.

The study carried out a detailed analysis of the wholesale electricity markets of Belgium, Germany, Spain, France, the Netherlands, and Great Britain from 2003 to 2005.

The three part study confirms that most markets are concentrated and finds that mark-ups over pure competitive prices are generally higher in Germany and Spain, and lower in Britain and the Netherlands.

The study also examines the impact of fuel prices, with the largest price rises being in Holland and Britain, essentially due to the large fleet of gas-fired plants in those markets. By contrast the impact of fuel price rises was less in Germany and Spain.

The third part of the study examined the relationship between the number of operators competing at a given time and the mark-ups finding that the more needed generators are, the higher the mark-ups in the market become.

The full report is available at: http://ec.europa.eu/comm/competition/sectors/energy/inquiry/index.html


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