Last weekend I looked at the current status of the market opening in several countries in Europe. Having started one in Belgium almost five years ago, I see similar hurdles in most countries. The countries I looked specifically are Spain, France, Belgium and The Netherlands (as Essent headquarters are located there, I feel a natural tendency to look at this market).
One thing is clear: in all countries, opportunities for new suppliers have decreased the last two years. This year especially, it has become impossible to start up new independent suppliers as wholesale markets close at a rapid pace. Especially the liquidity in this market is becoming a problem. When talking to producers of electricity in Spain for example, I get the same message. Why would they sell to a supplier with a discount if they can sell their energy on the power exchange at full value? Although most of them admit that being active in supply is necessary, there is a lot of wait and see going on.Â
Looking at France and Spain for example were regulated tariffs still exist today, we see that new suppliers are failing one by one. Current regulated tariffs are well below wholesale market prices which result in a serious cash drain (read: loss). In Belgium, we have also seen a shift. In the â€œold daysâ€ there was cross subsidizing, because mostly the small and medium sized companies and households paid for â€œcheap electricityâ€ for the large industrial users.Â These days things have shifted dramatically, prices for retail consumers and small and medium sized companies are well below wholesale market prices and large industrial customers are complaining.
Another astonishing fact is that since 2002 a lot of new regulation has been written to support the opening of the markets by the 1st of July 2007. Despite the complaints of overregulation when you talk to suppliers, the real opening of the market has become smaller. Until today, market regulators have not been given enough power to force market opening. This has resulted in a concentration on necessary details.Â
The top issues in liberalizing any market have to be addressed before the opening of a market and not during or afterwards. In production, at least four competitors should exist before opening a market. Furthermore, a strong regulator should be in place, an independent clearing house should take care of all customer usage data, etcâ€¦Â Without these essential starting points, there is no point in opening a market. In some articles, people start to write that it might be better to go back to the drawing board and start all over again. Looking at the results so far, I tend to agree with their statements.
Europe should ask their members to have the courage to decide on this and at the same time agree on a common timeline. All steps should be taken at the same time and content should be defined so that conditions are the same in all countries.