The Deregulation Of The Electricity Market

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What deregulation means
The term liberalization or deregulation generally refers to the “abolition of rights of monopolies, creating a competitive market that guarantees fair prices for the consumers and efficient economic cost of supplying electricity. Three economic conditions are a “prerequisite” to a competitive market in order to achieve a successful transformation from a highly regulated monopolistic to a transparent and deregulated market:
- Free consumer choice: consumers must be able to freely choose their electric energy supplier after having compared prices and services of competing electricity supply companies),
- Third party access (TPA): free and competitive market has to guarantee unimpeded access to transmission and distribution networks for companies which do not own them. Otherwise, competition in the electricity market would not be possible due to the physical characteristics and the natural monopolistic market design within the sector
- Unbundling: transmission and distribution networks have to be separated from the generation and retail business of vertically integrated utilities
Description of the electricity market
First of all, it is to mention that the electricity sector is a comparatively complex one. This complexity and singularity can be explained on the basis of three categories: constituent parts of the sector, physical characteristics and the specific market design.
1) Constituent parts of the electricity sector
The electricity sector

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