Privatization and Liberalization in the Downstream Electricity Market

 

Who is accountable for an energy policy?

There are a variety of main reasons why the duty for (of) a power policy is fundamentally that from government entities. In historical terms, most electricity and gas supply industries (instead of production systems) were formerly beneath the complete ownership and charge of governments. In countries like the usa and Germany the location where the facilities were typically privately owned, these were still operated as outlined by directions distributed by the government regulator. There is very little or no distinction between the operation of a state monopoly as well as the operation of the private sector monopoly under direct governmental regulation.

Considering the fact that state control is usually the beginning point, it makes sense that structural problems linked to transforming monopoly markets into liberalized, competitive markets is only able to be dealt with from the government. The us government has to carry out the enabling act (usually legislation) so that you can transform the current structure into whatever structure is demanded from the policy of liberalization and privatization. The relationships from the newly created players must also be addressed by government in order to lay out the floor rules from the new market. The federal government creates the policy which often is implemented to ascertain the newest market structure, and addresses any structural problems of the introduction of competition and new participants.

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Structural problems that necessitate the federal government taking responsibility for energy policies

These structural problems can include the matter of tariff/pricing, barriers to entry (use of networks) due to natural monopoly element in the downstream sector, option of supply, etc. Moreover infrastructures for the industry require medium and long term coordination and guidelines for all players. Centralized policies and guidelines reduce uncertainty while government policies will make up for market deficiencies. Governments possess a proper role in setting national energy policy objectives but these needs to be kept to a minimum and applied in the fair and easy to understand way.

Governments in adopting energy policies have embraced variations of privatization and liberalization for overhauling the electricity industries. The place to start for privatization and liberalization in most of these countries is pretty similar. Important issues to keep in mind in this way include the following: Electricity industry has undergone some form of privatization in lots of countries. Private sector participation in electricity (outside those countries with regulated privately-owned systems) generally began inside the 1980s, leading to the introduction of a qualification of competition in the downstream energy industries.

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