Costs of electricity deregulation

Chi Keung WOO, M. KING, A. TISHLER, L. C. H. CHOW

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35 Citations (Scopus)

Abstract

The last decade has witnessed efforts throughout the world to deregulate the electricity industry, with varied results. While there have been a few qualified success stories, many challenges of deregulation have come to light. These challenges can lead to negative, even disastrous, outcomes. Based on a comprehensive literature review, this paper catalogues problems experienced in various deregulation efforts, and considers the application of the lessons learned from this history to Israel, which is considering deregulation. Failings of deregulation are found to center around the following problems: high set-up cost; complicated market design; inevitable spot price volatility; market power abuse; inefficient investment; difficulty in reducing generation cost; dysfunctional input markets; stranded cost; unequal distribution of benefits. We find that many of these problems are exacerbated by the particular circumstances faced by Israel, and advise any country or region considering deregulation to carefully consider these obstacles to success. Copyright © 2005 Elsevier Ltd. All rights reserved.
Original languageEnglish
Pages (from-to)747-768
JournalEnergy
Volume31
Issue number6-7
DOIs
Publication statusPublished - May 2006

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Citation

Woo, C. K., King, M., Tishler, A., & Chow, L. C. H. (2006). Costs of electricity deregulation. Energy, 31(6-7), 747-768. doi: 10.1016/j.energy.2005.03.002