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Introduction: Reframing the Notion of Sustainable Economy Through Perspectives on Limits, Tensions and Paradoxes Within the System Read chapter Read first chapter

2018 | OriginalPaper | Chapter

The Paradoxes of the European Energy Market Regulation: A Historical and Structural Analysis of the Electricity Mix

Authors : Bianka Shoai-Tehrani, Pascal da Costa

Published in: Towards a Sustainable Economy

Publisher: Springer International Publishing

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Abstract

The aim of the Chap. 2 is to understand how the drivers of investment decisions in electricity production have evolved over time-from 1945 to the present day, in the specific context of Europe facing wars and conflicts, scientific and technological progress, all within environments undergoing strong political and academic developments.
We study investment in power production decisions by comparing the history of European electricity markets with successively dominant economic theories in this field. Therefore, we highlight differences between rational behaviours, such as those described by theory, and actual behaviours of investors and governments. Liberalization is clearly on the agenda given its 25-year history in terms of European Union markets, as well as forming part of a rationalization that is prescribed by new economic theories. It remains considerably heterogeneous, which complicates the creation of a large single market for electric power within the Union.
We see also new constraints on energy policy in Europe, which takes the form of new regulation, mainly relating to climate and renewables. As liberalization and climate policy were initially separate packages in EU legislation, their combined effects pose a critical ‘missing money problem’ to major utilities, thus making for this re-regulation, that is nonetheless different from the centralized control experienced by all European electricity markets until the mid-1980s.

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previous chapter Introduction: Reframing the Notion of Sustainable Economy Through Perspectives on Limits, Tensions and Paradoxes Within the System
next chapter A Prospective Analysis of CO2 Emissions for Electric Vehicles and the Energy Sectors in China, France and the US (2010–2050)
Footnotes
1
The first optimization model based on Cost-Benefit Analysis was developed in 1955. Massé said at the time: ‘The electricity industry has found a purely objective tool in order to take investment decisions without personal bias (Beltran and Bungener 1987).
 
2
To be more specific:
  • The risks related to operational costs and especially fuel costs were assessed by using past data: no changes in future trends were considered;
  • The risks related to investment costs were mainly due to construction risks associated with the land on which the plant was being built: it was considered as a mathematical expectation that was added to the investment cost as a security expense;
  • The risks related to financing programmes (volatility of public decisions) were identified but not taken into account;
  • The risks related to the expenses of financial compensation offered due to damages caused by plant construction gave us a first glimpse of the internalisation of externalities, but again no modelling was considered since it was too risky to be assessed.
 
3
The conflict occurred between Egypt and an alliance formed by Israel, France and the United Kingdom, after the nationalization of the Suez Canal by Egypt, the canal being a strategic step for oil imports.
 
4
Weisbrod, Arrow et Henry completed these theories in the 1960s and 1970s by addressing the issue of public decision in uncertain environment (Weisbrod 1964; Arrow 1965; Henry 1974).
 
5
This effect measures the tendency of companies to engage in excessive capital accumulation in order to increase the volume of their profit.
 
6
E.on and RWE are historically multi-utilities and are very present on the gas market as well as the electricity market.
 
7
It plans cutting greenhouse gas emission in 2020 (−20% compared with 1990), increasing energy efficiency (+20% more than business-as-usual projections for 2020) and objectives regarding the generation mix (20% renewable energies in the mix).
 
8
Experts from the following institutes/companies were interviewed: Electricite de France (EDF), Reseau de transport d’electricite (RTE), Enedis (Former ERDF Electricité Réseau Distribution France), World Energy Council, French Energy Council, CREDEN (Montpellier I University), CIRED, CERNA (Mines ParisTech), Institute for Techno-Economics of Energy Systems, CEA Saclay, Laboratory of Industrial Engineering, CentraleSupélec, (Paris-Saclay University), Climate Economics Chair, Paris, Central Research Institute of Electric Power Industry (CRIEPI) of Japan, Institute of Energy Economics of Japan (IEEJ).
 
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Metadata
Title
The Paradoxes of the European Energy Market Regulation: A Historical and Structural Analysis of the Electricity Mix
Authors
Bianka Shoai-Tehrani
Pascal da Costa
Copyright Year
2018
Book
Towards a Sustainable Economy

Print ISBN: 978-3-319-79059-6

Electronic ISBN: 978-3-319-79060-2

Copyright Year: 2018

DOI
https://doi.org/10.1007/978-3-319-79060-2_2