Integration and regulation within the energy sector. A Danish and European perspective

We point out in the project that there is a big difference between the level of analysis and the implications of designing new electricity markets. Where most regulatory frameworks are designed at industry level, with some implicit assumptions about the rationality of the individual company, the reality often look very different when the famework is implemented. Companies are inert and the transition they need to go through is on a scale not found in any other industry outside the utility sector. This slow change both in culture and the way the organization conducts its daily routine often is far from the behavior assumed in the regulatory framework. This creates tension both within the specific companies as well as in the way the industry as a whole evolves. Using scenario techniques we look at the condition that are needed before a single market for electricity in Europe can be created and conclude that we are more likely to observe the creation of local (regional) markets rather than the ideal of a single market. We also look at the issucs around transmissions, which potentially is one of the most complicated areas of deregulation in terms of pricing and possible future competition. Furthermore, a model describing the theoretical evolution and behavior of a non-profit market is being developed to describe what the likely side effects of such a market might be