Good Governance and the Regulation of the District Heating Market
35 Pages Posted: 12 Oct 2019 Last revised: 28 Sep 2020
Date Written: October 9, 2019
This paper discusses whether the principles of good regulation and good market supervision could play a role in developing a more consistent approach towards the regulation of the energy sector and, more in particular, in dealing with the challenges of regulating the heat sector. It is concluded that the principles of good governance indeed can provide a useful framework within which advantages and disadvantages can be weighed of regulatory choices to be made when modernizing the regulation of the heat market. In particular there remains a lot to gain in terms of flexible regulation and supervision as well as the facilitation of citizen participation. The lack of flexibility in the current regulatory framework could lead to ineffective and disproportionate regulation hindering a sustainable, reliable and affordable development of the heat market. A larger need for flexibility is justified because of the differences between the types of heat networks. Customised solutions regarding unbundling and thirdparty access – as well as the modernisation of the heat market – also require sufficient discretionary powers for the independent regulator that do not hinder, but rather stimulate the development of the heat market. Furthermore, increased citizen-participation, is important in light of energy justice and energy democracy – energy specific concepts that are gaining influence when interpreting and applying the principles of good governance in the energy sector. Both concepts are based on the awareness that the energy transition is a matter for all citizens of the European Union and should not be ignored by policy-makers and independent regulators. Because it is likely that most heat consumers will remain locked in for a relatively long time in natural monopolies facilitated by older generation heat networks and the lack of alternative heating, substantive citizen-participation could yield positive results regarding community engagement in heat network management and heat supply.
Keywords: heat market, economic regulation, good governance, regulatory disconnect, energy transition, energy
JEL Classification: K00, K20, K23
Suggested Citation: Suggested Citation