Electricity market reform failures: UK, Norway, Alberta and California

Chi-Keung WOO*, Debra Lloyd, Asher Tishler

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    142 Citations (Scopus)

    Abstract

    An analysis of electricity market reforms already taken place in the UK, Norway, Alberta (Canada) and California (USA) leads to our overall conclusion that the introduction of a competitive generation market, of itself, has failed to deliver reliable service at low and stable prices . The market reform failures are attributed to market power abuse by few dominant sellers (especially at times of transmission congestion), poor market design that invites strategic bidding by suppliers, the lack of customer response to price spikes, capacity shortage caused by demand growth not matched by new capacity, and thin trading of forward and futures contracts that are critical for price discovery and risk management. The paper then explains why an electricity market reform can easily fail to deliver the promised gains of better service at lower and more stable prices. The policy implication is that an electric market reform can be extremely risky, and may lead to a disastrous outcome. Thus, it is imprudent to implement such a reform in countries with limited sites for new generation and no indigenous fuels (e.g., Israel and Hong Kong). These countries should therefore consider introducing performance-based regulation that can immediately benefit electricity consumers in terms of lower prices, more stable prices, improved reliability, more choices, while encouraging the electric sector to pursue efficient operation and investment.

    Original languageEnglish
    Pages (from-to)1103-1115
    Number of pages13
    JournalEnergy Policy
    Volume31
    Issue number11
    DOIs
    Publication statusPublished - Sept 2003

    Scopus Subject Areas

    • Energy(all)
    • Management, Monitoring, Policy and Law

    User-Defined Keywords

    • Electricity market reform
    • Performance-based-regulation
    • Reform failures

    Fingerprint

    Dive into the research topics of 'Electricity market reform failures: UK, Norway, Alberta and California'. Together they form a unique fingerprint.

    Cite this