Liberalisation and Regulation in Electricity Systems: How can we get the balance right?

Abstract

This paper explores the issue of the balance between liberalisation and regulation in electricity systems, which is the essence of much of the detailed policies which are implemented in the sector. By liberalisation I take to mean the use of market or quasi-market mechanisms as part of a reform of the sector, by regulation I take to mean regulatory intervention to restrain the operation of market signals which would otherwise have operated in the absence of regulation. The paper takes an international perspective to look at the case for liberalisation, the case for regulation and the evidence on the effects of liberalisation. It concludes with an assessment on the future for electricity liberalisation. This paper forms the foreward to Sioshansi, F.P. (2008) (ed.), Competitive Electricity Markets: Design, Implementation, Performance, Oxford: Elsevier and makes reference to the papers in that volume.