by DoDo
Mon Jul 9th, 2007 at 11:27:57 AM EST
EurActiv posted an article titled Energy liberalisation: A communication gaffe?, where the 'communication gaffe' is how Antoine Pellion of the Schuman Foundation characterised the claim that liberalisation brings lower prices.
The article brings a good overview of some criticisms of the dogma, but not enough -- so after the alert, I wrote an LTE, finished with the help of others in our 'think-tank'. (Or are we an NGO? We were classified as such for the EC Biofuels Consultation [pdf!].)
EurActiv now posted the LTE, albeit with mangled credits.
Liberalised energy markets 'do not work in practice'
Concerning Energy liberalisation: A communication gaffe?, how lenient to describe the claim that liberalised markets reduce prices as a "communications gaffe"! Rather, it is a deliberately misleading sales pitch, also known as "spin".
More below the fold.
Liberalised energy markets 'do not work in practice' Published: Monday 9 July 2007
Sir,
Concerning Energy liberalisation: A communication gaffe?, how lenient to describe the claim that liberalised markets reduce prices as a "communications gaffe"! Rather, it is a deliberately misleading sales pitch, also known as "spin".
Contrary to Commissioner Andris Piebalgs almost religious belief in liberalised energy markets bringing "the best prices and the best service", the idea is not even workable in practice.
One could point to the California energy crisis, or to how the German liberalisation panned out. But the faithful will always blame insufficient dosage of their remedy, so let's focus on three systemic problems.
First, it is not just protectionism that shields existing majors against newcomers. Their own pre-existing power counts, too. With pre- or post-liberalisation price-hikes and investment throttling, they can create a 'war chest' for an eventual price war. They can use dozens of anti-competitive tricks over a sustained period of time, which together can be effective even if each one is successively struck down by regulators.
The other two problems lie beneath the policy contradictions that Bruegel pointed out.
Security of supply is not merely a function of the suppliers' size and degree of integration. Open price competition also cuts into investment chests. Furthermore, investors prefer generation modes with quick return on investment, crippling long-term security policy.
Pricing environmental externalities into fossil-fuel use doesn't eliminate all obstacles to regenerative energies on free markets: regeneratives typically have higher up-front investment costs and long amortization times, thus causing higher financing costs and slower returns on investment, both structural handicaps for private-sector investors.
P. Manet
Vác, Hungary
No, I am not a French Painter, they apparently lost the email reply in which I gave my real name. They also left off European Tribune as Organisation.