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Policy Orientation and Effect Evaluation of Electricity Market Reform in Major Countries
Policy Orientation and Effect Evaluation of Electricity Market Reform in Major Countries
The goal of power reform in major countries in the world is generally to ensure long-term reliable power supply, break monopoly, introduce competition mechanism, and realize the marketization of electricity price and improve efficiency. In practice, there is no fixed pattern of power reform in all countries in the world, and each country has chosen a different reform path according to its own national conditions and reform objectives.
Electricity Market Reform in the United States
Before the reform of the United States, all states were monopolized by a power company with a single power grid. The power system reform that began in 1992 can be divided into federal power system reform and state power system reform. The Federation is only responsible for formulating uniform regulations and making competitive mandatory requirements, and the states then follow the principles of marketization to form electricity markets. The general direction of the reform at the federal level is to increase the degree of marketization and encourage competition. The most typical reforms at the state level are the California model and the PJM model.
(1) Policy guidance: The Energy Policy Act (EPACT) passed in 1992 requires power companies to use their own transmission lines to transmit the electricity traded by other power companies. In 1996, the Federal Energy Regulatory Commission (FERC) issued Directive 888/889, requiring companies with transmission facilities to provide fair access to all parties without discrimination on a cost-pricing basis, and to encourage the formation of Independent Grid Operating Institutions (ISOS). In 1999, FERC issued Decree No. 2000, which required the establishment of a regional transmission agency (RTOS). In 2001, FERC required power companies to hand over all transmission assets to RTOS and envisaged the establishment of five major RTOS in the United States.
(2) Market development: Before the reform of the U.S. power system, the degree of electricity marketization was already high. After the reform, the degree of marketization has been further improved, and the separation of power generation, transmission and distribution business has been realized, and the competition among different competitors on the power generation, transmission and distribution side and the power sales side has been realized. However, the United States has not established a unified national power grid structure and power system, but the states are free to set up regional power markets.
(3) Effect evaluation: In general, competition improves the operating efficiency of the power generation side and the power grid, reduces the cost of power generation and power supply, and long-term contracts enable power generators, power transmission and distribution providers and power suppliers to avoid the risk of price fluctuations of some raw materials and ensure the stability of basic electricity demand. The California model failed due to flawed market design and high and volatile electricity prices, while the PJM model was more successful due to a good market competition environment, efficient grid scheduling and power production.
Electricity market reform in the UK
Before the reform, the British power industry implemented vertical integration monopoly operation. The reform is roughly divided into two stages: the first stage is to split the Central Electric Power Bureau (CEGB), break the monopoly of vertical integration in the four links of power generation, transmission, distribution and sales, and introduce privatization and competition. The second stage is mainly to establish an open power trading market, which has formed three different market operation modes: POOL, NETA and BETTA.
(1) Policy guidance: In 1988, the government published a white paper on "Privatization of Electricity Market" and in 1989, a new "Electricity Law" was promulgated, laying a legal foundation for reform. In the following years, the shares of the restructured companies were listed one after another, achieving the goal of privatization. In 2001, the new electricity trading rules NETA replaced the POOL, established the bilateral contract market and the balance mechanism market, and adopted the vertical integration of adjusting the relationship between power supply and power generation and the horizontal integration of adjusting the relationship between power supply companies. The Energy Act 2004 was enacted to provide the basic legal framework for the establishment of a unified UK electricity trading and transmission system (BETTA), which has been implemented as planned to date.
(2) Market development: the main body of the market is more fully developed, in 1990 the United Kingdom Central Power Authority split into the National Grid Corporation, 3 power generation companies and 12 local distribution and power supply companies, while the establishment of a power bank. Gradually open up large users to directly choose electricity suppliers, in 1998 to the following 100 kW users, the establishment of free competition in the electricity retail market, the current retail market has been open to all users.
(3) Effect evaluation: The power reform in the UK is one of the most representative reforms of power marketization, and it is also the first time in the world to adopt a market-based reform model. The goal of the reform is privatization and marketization. The reform has realized the improvement of the power bank, promoted the healthy competition in the power market, reduced the electricity price, improved the efficiency, and expanded the scope of power trading to the whole UK.
Electricity Market Reform in France
EDF is absolutely dominant and has a good performance, so the French government has always held a negative attitude towards power reform. However, under pressure from the European Union, the French electricity industry has gradually carried out some reforms, formulating and implementing the Law on the Development and Innovation of Electric Public Services, but the new electricity law has not changed EDF's market monopoly position, and EDF, which owns 80% of nuclear power, has not carried out relevant privatization reforms.
(1) Policy guidance: The New Electricity Law has clear requirements on the mission of public services and their sources of funding. It establishes a timetable for market opening on the power supply side and identifies users with options on the demand side. The establishment of transmission network management organizations managed by different agencies independent of power generation companies; EDF separates the accounts of generation, transmission and distribution financially. It can be seen that the government did not spin off the vertically integrated French power company, but through the appropriate separation of the internal business of the French power company and the reasonable supervision of the regulatory department to achieve the EU's requirements for market competitiveness.
(2) Market development: the main body of the market is relatively single, and EDF is in an absolute monopoly position. Although the European Union and the New Electricity Law require the opening of the market and the introduction of competition, it is impossible for other companies to compete with EDF because of its strength and position in the French electricity market. The result of natural market selection can only be to further strengthen EDF's monopoly position, unless EDF is split.
(3) Effect evaluation: the French government is actually opposed to the privatization and market-oriented reform of the power industry. Although some innovations have been made under the pressure of the European Union, the effect of the reform is not obvious because it does not involve the fundamental. France is the second largest nuclear power country in the world, and the proportion of nuclear power in the power structure is as high as 80%. It is obviously not good for nuclear safety to realize the marketization and liberalization of nuclear power. Moreover, this kind of power structure is not only conducive to the stable supply of cheap electricity, but also conducive to the emission reduction of greenhouse gases and other polluting gases, so there is little need for reform.
Electricity Market Reform in Japan
In the 1990 s, the level of electricity prices in Japan was generally higher than that of major European and American countries, so Japan began to discuss how to introduce competition in the power industry to reduce prices, and the reform was carried out from the retail side to liberalize user choice and the power supply side to introduce competition mechanism.
(1) Policy guidance: In 1995, the 1964 Electric Power Utilities Law was revised for the first time, power generation side control was relaxed, independent power producers (IIPs) were introduced, and a bidding mechanism for new power projects was implemented. The second revision in 1999 introduced partial liberalization on the retail side of electricity and revised the electricity price system. In March 2000, the development became the liberalization of retail sales for large electricity customers, who accounted for about 30% of all electricity demand. The three amendments in June 2003 continued to maintain a monopoly on the transmission system, but different scheduling mechanisms were developed to ensure fair disclosure to users.
(2) Market development: Japan's domestic power market consists of 10 vertically monopolized privatized power companies, which are divided into regions to implement integrated monopoly management. In addition, the Government and nine major power companies jointly invested in the establishment of the Power Development Corporation and the Japan Nuclear Power Corporation. Since Japan's primary energy is mainly imported, the power supply structure of the 10 major companies is similar, and the 9 major power grids operate basically independently, with very little interchange.
(3) Effect evaluation: Japan's power reform has achieved remarkable results in reducing electricity prices. After the implementation of the new "Electric Power Business Law", although international energy prices continue to rise, Japan's electricity prices have dropped by an average of about 35%, and the proportion of retail liberalization has continued to increase. However, the reform did not fundamentally touch the power system, and the vertical integration of the 10 major power companies in their respective regions was still maintained, and only the power exchange was established.
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