The European Energy Market Essay

665 Words Dec 24th, 2011 3 Pages
The European Energy Market
For several years now the European Union, the largest regional trading block in the world, has been trying to liberalize its energy market, replacing the markets of its 27 member states with a single continent wide market for electricity and gas. The first phase of liberalization went into effect in June 2007. When fully implemented, the ability of energy producers to sell
electricity and gas across national borders will be improved, increasing competition. The road toward the creation of a single EU energy market, however, has been anything but easy. Many national markets are dominated by a single enterprise, often a former state owned utility. Electricitie de France, for example, has an 87 percent share of
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In mid 2008, they reached a compromise that fell short of mandating the unbundling, or disintegration, of national energy companies due to powerful opposition from France and Germany among others (both nations have large vertically integrated energy companies).
The response of established utilities to the creation of a Single continent wide market for energy has been to try to acquire utilities in other EU nations in an effort to build systems that serve more than one country. The underlying logic is that larger utilities should be able to realize economies of scale, which would enable them to compete more effectively in a liberalized market. However, some cross- border takeover bids have run into fierce opposition from local politicians who resent their "national energy companies" being taken over by foreign entities. Most notably, when E.ON, the largest German utility, made a bid to acquire Endesa, Spain's largest utility, in 2006, Spanish politicians sought to block the acquisition and keep ownership of Endesa in Spanish hands, imposing conditions on the
deal that were designed to stop the Germans from acquiring the Spanish company. In response to this outburst of nationalism, the European Commission took the Spanish government to the European Union's highest court, arguing that Madrid had violated the Commission's exclusive powers with in the EU to scrutinize and approve big cross-border mergers in Europe. Subsequently, Enel,…