Using the Data and Your Knowledge of Economics Assess the Arguments for and Against the Government Intervening in the Uk Electricity Industry. (25 Marks)

This essay will detail the impact of EU liberalisation policy on the UK energy industry and relate this to a previous sample of a group of suppliers. This essay will discuss industry supplier concentration, oligopoly and monopolistic competition, the EU competition commission and potential single markets which are not yet subject to scrutiny by the competition commission.

The stage for a deeper integration of Renewable Energies in the UK was set by a number of these policies which has evolved over the years. These policies however were not delivering maximum efficiency when compared to other policies in other European countries. For instance, the inefficiency of some of the policy mechanisms when compared to those obtainable in Germany had been severally argued. The Energy White Paper 2003 was largely a response to the future of the UK Energy industry drawing from the failures of these past policy implementations.

1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an

By smaller businesses not being able to compete, this just gave the already huge companies even more power.

In 2007, Canada’s industries saved 2.1 billion U.S. dollars of energy costs (2007). All these numbers show Canada’s efforts in general public utilities.

In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.

Total Study Time: 150 hours, comprising 40 classroom hours and 110 hours of personal study.

In the last year in U.K. there have being a fierce pressure to apply a wide-ranging price cap on energy bills, which will be analysed

The provision of energy is riddled with market failures. For instance, the U.S. maintains a military presence in the Middle East at least partly in order to secure energy supplies, but to what extent do U.S. consumers pay for that at the pump? Anecdotally, petrol costs about half in the States what it does in Europe. For another example, short haul flights are often cheaper than train tickets to the same destination, and yet, air travel is about ten times worse for the environment than is rail. Does the cost of either ticket account for this difference? Both the production and consumption of energy give rise to economic costs that are difficult to allocate. These externalities are a

In practice, energy subsidies come in different forms. (The IEA, 2002) and (UNEP, 2008) identify the following typical mechanisms by which governments support the production and consumption of energy:

Energy as gas or electricity constitutes a huge part of the current market supply, which have a strong impact not just in the environment but also in the economy as a whole. According to Allen, Hammond and McManus (2007) as energy worldwide demand is growing, the scarcity for resources grows too, which is threatening not only energy security but also energy costs. OFGEM´s (2014) report´s, analyses the gaps and adquisitions of the energy market supply in Great Britain, where they found that the energy service supplied is dominated by six main firms, which have been facing strong problems with consumers decreased trust, higher costs, wider barriers to entry, evidence of a possible tactic coordination and lack and weak

In Katrin Jordan-Korte’s book she compares strategies of implementation of renewable energy markets and technologies to find what is the most effective strategy. Through her research she attempted to answer what specific renewable energy techniques were the most effect and efficient while also trying to find whether or not stricter or more lenient government decisions lead to a more successful energy promotion. One conclusion Katrin finds is that, “Government promotion is important and is warranted to secure a sufficient diffusion of renewable energy sources,” (219). The reason she believes government promotion is necessary is because without there being enforced policies on the use of renewable energy then because of the difference in cost power generation companies would shy away from using renewable energy technologies. The two best options of government implementation of renewable energy usage are either through taxation on nonrenewable energy sources, or through rewarding power generation companies for using renewable energy sources. The benefits of taxation are the relatively immediate and obvious decision a power generation company would have to make of having to begin using renewable energy sources in order to save on the newly created high costs of fossil fuels. This technique has been used in Germany which did lead to an initial spike in the diffusion of renewable energy. The issue that Katrin believes will come with any government who uses this method is that for

b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.

Earlier this year, it was reported that between 2012 and 2013 approximately 800,000 jobs were lost in the clean energy sector. In a time where global warming is becoming progressively prevalent, the government and clean energy companies should be employing more people, not sacking them. As well as the 800,000 jobs lost, since Prime Minister Tony Abbott was elected, investment in renewable energy has also plummeted by an astounding 88%. The only other country in the world last year to experience a decline in renewable investments was Italy. And that was due to regulatory changes.

Deregulated wholesale electricity markets exhibit levels of price volatility unparalleled in traditional commodity markets. Having lower volatility will allow large industrial consumers to better plan their electricity usage.