Liberalization of the Electricity Market in Europe : An overview of the electricity technology and the market place

The electric power industry in European Union is undergoing profound regulatory and operational changes. The underlying rationale behind these transformations is to move only highly monopolized vertically-integrated industry from a centralized operation approach to a competitive one. European energy liberalization is underway to develop an internal market for electricity. Energy initiatives for EU are occurring in conjunction with measures to implement energy efficiency, renewable energy, and emissions trading of greenhouse gases. In response to EU Directives and policies and national initiatives, the EU market is evolving at the same time as environmental measures for energy are being considered. This paper discusses the process by which the countries of the EU have restructured their electricity markets. It shows that the restructuring process has focused on legal and organizational issues, but it doesn’t contain specific prescription for economic design of the market. Apparently, the lack of regulatory framework harmonization is particularly harmful to the economic design of the market handling market power problems.