ABSTRACT
Liberalization of electricity markets has been under consideration in many organisation for economic co-operation and development countries and in some other countries as well. In the case of the european union (EU), liberalization and economic integration – the creation of a single electricity market – go hand in hand; thus naturally both pricing issues and safety of supply have an international dimension. Weak competition in energy markets implies relatively high prices and a low rate of innovation, including service innovations associated with the provision of electricity. The oil market, shaped by the OPEC cartel with its market power, dominates the gas market which in turn strongly influences electricity prices, not in the least in spot markets, as gas-powered electricity generation is relatively flexible in its response to changes in demand. The lack of competition in electricity is clearly visible in large price differentials across the 25 EU countries.
