Transmission Network Unbundling and Grid Investments: Evidence from the UCTE Countries
33 Pages Posted: 9 Jun 2010
Date Written: May 6, 2010
The European Commission’s proposal to unbundle electricity transmission network encouraged a great debate among involved players. Mainstream economists suggest that unbundling of both the transmission (TX) network and the interconnections (ICX) can be seen as a structural solution to the problem of low investments in the grid and consequent high concentration of markets in favour of incumbents (among others, Léautier, 2001). Other scholars point out that benefits have to be compared to costs of unbundling (Kaserman and Mayo, 1991; Kwoka, 2002). Recent literature underlines that net effect is ambiguous; more empirical evidence is needed (Brunekreeft, 2008; Pollitt, 2008). Consequently, this paper will propose an empirical analysis to evaluate whether, and to what extent, unbundling measures are related to the increase of grid investments, focusing on UCTE countries between 2000 and 2006. Results are twisted: unbundling tout court cannot be related to a consistent enlargement of the grid, while quality performance is better than in not unbundled systems. In case of ownership unbundling although higher investments in the network, a substantial lack of quality emerges, confirming diseconomies of coordination in ownership unbundled systems.
Keywords: Transmission Unbundling, Electricity Policy, Investments
JEL Classification: L38, L52, L94
Suggested Citation: Suggested Citation