European Utilities Network Unbundling

Content

• Chapter 1 Executive Summary
  • European markets are complying with the letter but not the spirit of the EU directive and thus holding back fair and competitive markets
  • 7 out of 26 markets have fully complied with both electricity transmission and distribution unbundling
  • A correlation exists between electricity network unbundling and the political standing of respective national governments
• Chapter 2 Introduction
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• Chapter 3 Unbundling Compliance
  • European markets are complying with the letter but not the spirit of the EU directive and thus holding back fair and competitive markets
  • Stated common rules of unbundling in EU 2nd electricity and gas directive give guidance on functional unbundling
  • EU 2nd Directive - Electricity
  • EU 2nd Directive - Gas
  • Alongside the functional unbundling, governments have to develop legal and account unbundling
  • High degree of TSO compliance with Directive and going further with ownership unbundling
  • Electricity distribution unbundling has met with a lower rate of compliance with the EU 2nd Directive
  • High degree of power TSO compliance with Directive and going further with ownership unbundling
  • Low levels of gas TSO compliance with Directive and only go as far as accounts unbundling
  • Markets vary by energy type and network function in how far they have complied with the basic EU requirements over unbundling
  • TSO unbundling compliance is greater than DSO across EU markets
  • 7 out of 26 markets have fully complied with both electricity transmission and distribution unbundling
  • Only 4 out of 20 markets have fully complied with both gas transmission and distribution unbundling
  • More markets are electricity compliant than gas compliant when combining TSO and DSO unbundling
• Chapter 4 Correlating Unbundling Compliance
  • National politics, not technical reasons, is the only clear driver of network unbundling status
  • No distinct correlation between electricity network unbundling and GDP
  • Some indication of markets with higher GDP per capita are further along network unbundling
  • No discernable trend between power network unbundling and total power demand
  • No discernable trend between power network unbundling and power demand per capita
  • No discernable trend between power network unbundling and total network length
  • Some indication of markets with higher km of network per capita are more compliant on network unbundling
  • No apparent correlation between electricity network unbundling and total number of distribution companies by market
  • No apparent correlation between electricity network unbundling and number of distribution companies per capita by market
  • No apparent correlation between electricity network unbundling and total Regulators staff numbers
  • No apparent correlation between electricity network unbundling and total Regulators staff numbers per capita
  • No apparent correlation between electricity network unbundling and total Regulators budget
  • No apparent correlation between electricity network unbundling and total Regulators budget per capita
  • A correlation exists between electricity network unbundling and the political standing of respective national governments
  • No direct correlation exists across a range of top level factors for network unbundling, making it harder for the EU to "fix" it
  • No one factor determines the rate of network unbundling, the rate is driven by a range of factors
• Chapter 5 Network Unbundling And Datamonitor's Mci
  • To deliver market based competition both the EU and Datamonitor concur on the role of ownership unbundling
  • Markets can be categorised under 4 ways on how there market complies with network unbundling
  • Immature markets
  • State protected
  • Minimal compliers
  • Maximum compliers
  • The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment
  • The key drivers behind successful network unbundling exist within Datamonitor's Market Framework component within its MCI Index
  • Effectiveness of regulator
  • Ease of Third Party Access
  • Effectiveness of balancing & data transfer
  • Aligning network unbundling with the effectiveness of regulator, 10 of the 15 power market meet legally unbundled requirements
  • Aligning network unbundling with the effectiveness of regulator, 8 of the 15 gas markets meet legally unbundled requirements
  • Aligning network unbundling with the ease of TPA, only 3 of the 15 power markets meet legally unbundled requirements
  • Aligning network unbundling with the ease of TPA, 4 of the 15 gas markets meet legally unbundled requirements
  • Aligning unbundling with the effectiveness of balancing and data transfer, by 2008, 11 of the 15 power markets will be compliant
  • Aligning unbundling with the effectiveness of balancing and data transfer, 8 of the 15 gas markets are compliant
  • The EU scoring is more limited than Datamonitor's MCI power Market Framework scores
  • The EU scoring is more limited than Datamonitor's MCI gas Market Framework scores
  • Power markets split between high compliance and state protectionism over network unbundling
  • Gas markets show a greater spread across high and low compliance, state protectionism over network unbundling
• Chapter 6 Case Studies
  • Understanding the practical implications of network unbundling from a range of stakeholders
  • 7 case studies from inside and outside the EU, perspectives from regulators to distribution companies
  • CREG, Belgium - issues of unbundling from a Western European regulators perspective
  • Context
  • CREG, Belgium - scale still a prominent factor in fragmented DSO market
  • Approach
  • CREG, Belgium - issues remain on a common code and language, EDI delivery and parties talking
  • Results
  • CERA, Croatia - issues of unbundling from a Eastern European regulators perspective
  • Context
  • CERA, Croatia - issues revolve around how to implement a free market model in a nation that has little experience of such a model
  • Approach
  • CERA, Croatia - looking for guidance from inside and outside the EU
  • Results
  • Lietuvos Energija, Lithuania - smaller markets process of complying with EU TSO unbundling directive
  • Context
  • Lietuvos Energija, Lithuania - to achieve the end goal, project results and milestones had to be consulted on and agreed
  • Approach
  • Lietuvos Energija, Lithuania - direct contact, challenging accepted norms, identifying best practice delivered results
  • Results
  • Gasunie - understanding the process of gas TSO unbundling in the Netherlands
  • Context
  • Gasunie - has complied with the directive but has concerns over the rest of the internal EU gas market
  • Approach
  • Results
  • Nuon, Netherlands - issues surrounding ownership unbundling for DSO
  • Context
  • Nuon has hoped the government would listen to the Dutch energy companies and has therefore done little to unbunle
  • Approach
  • Nuon, as well as the other Dutch players, have left themselves little time to implement cost effective unbundling
  • Results
  • RWE, Germany - issues of compliance with a lack of regulatory authority
  • Context
  • RWE, Germany - networks regionalised to extract maximum synergies and profitability
  • Approach
  • RWE as with other potential network operations and service providers, need to understand detail and therefore the costs
  • Results
  • RWE has identified DSO unbundling offering commercial opportunities across three divisions
  • Results
  • Privatisation and liberalisation in the UK has led to reordering and convergence across utility markets
  • Context
  • UK retail-networks unbundling was the trigger for extensive corporate M&A and asset swap activity
  • Approach - Corporate Impact
  • Extensive system impacts were both driven and facilitated by a centrally co-ordinated industry wide programme
  • Approach - Systems Impact
  • Energy retail now has 6 major players, from the original 15
  • Results - Retail
  • 8 asset owners operate the UK's gas and power networks, but new owners are entering the market
  • Results - Networks
  • Issues surrounding DSO unbundling remain and companies and regulators still need to find solutions
• Chapter 7 Appendix
  • Additional tables on legal unbundling from EU and CEER
  • State of legal unbundling accredited by EU, across EU 25 internal markets and Norway, for power and gas, TSO and DSOs
  • Political standing of markets methodology
  • MCI Introduction
  • Parties and Elections in Europe - political orientation and classification
  • MCI Market trends - detail
  • The MCI Index assesses the competitive environments in 15 key European gas and power markets and forecasts switching behaviour
  • Phase 1 market scores have been tested, validated and revised through an extensive series of expert interviews with Phase 2 validation to follow suit later in 2006
  • Czech Republic Gas
  • The development of liberalisation will drive all of the Market Framework scores higher by July 2008
  • Czech Republic POWER
  • Market Framework factors are unlikely to develop significantly by 2008
  • France GAS
  • Regulatory effectiveness is the key driver of the Market Framework scores
  • France POWER
  • Increased pro-action and momentum from the Regulator are likely to drive the Market Framework metrics higher by July 2008
  • Germany GAS
  • Germany's Market Framework score is curtailed by the lack of a regulator and the relatively undeveloped TPA regime
  • Gernmany POWER
  • The already low Market Framework scores are further constrained by the current lack of a regulatory body
  • Ireland GAS
  • All of the Irish Market Framework factors will be at the upper end of the scale by 2008
  • Ireland POWER
  • Market Framework metrics generally score highly and are likely to further improve by July 2008
  • Italy GAS
  • The assertion shown by the Italian regulator has a major impact on the Market Framework metrics
  • Italy POWER
  • Italy's Market Framework score is driven by the Regulator's proactive reforms and strong stance on promoting liberalisation
  • Netherlands GAS
  • The relatively high Market Framework scores reflect the status of the Netherlands as an established and mature gas market
  • Netherlands POWER
  • The Market Framework metrics are driven by the competency of the regulator and its focus on social as well as market issues
  • Poland GAS
  • None of the Market Framework metrics increase their scores significantly between 2005 and 2008
  • Poland POWER
  • Market Framework scores will remain modest in 2008
  • Spain GAS
  • Spanish Market Framework scores will increase only slightly by 2008
  • Spain POWER
  • Market Framework metrics will remain in the middle range both currently and by July 2008
  • Sweden GAS
  • The undeveloped nature of the Swedish gas market constrains the Market Framework scores
  • Sweden POWER
  • The Swedish Market Framework metrics are likely to move up the scale by July 2008
  • UK GAS
  • The developed and fully deregulated nature of the UK market allows it to achieve the highest Market Framework score in this study
• Uk Power
  • The UK's Market Framework metrics all achieve scores at the top end of the scale
  • Belgium GAS
  • With a relatively strong regulator and favourable pipeline regimes, Belgium scores highly on the Market Framework factors
  • Belgium POWER
  • All of the Belgian Market Framework factors score at the upper end of the metrics scale
  • Croatia GAS
  • Full market opening later in 2006 will help give momentum to the 2008 Market Framework metrics
  • Croatia POWER
  • None of the Market Framework metrics shows significant improvement over the forecasting period
  • Greece GAS
  • The end of Greece's gas market derogation in November 2006 will help increase the 2008 Market Framework scores
  • Greece POWER
  • Development of the Market Framework factors will be limited between now and 2008
  • Latvia GAS
  • All of the Market Framework factors will remain modest throughout the forecast period
  • Latvia POWER
  • None of the Market Framework factors show particular improvement over the forecast period
  • Russia GAS
  • Russia's Market Framework factors all score at the lower end of the scale with little improvement likely to be seen by 2008
  • Russia POWER
  • Other than possible changes in the balancing regime, the Market Framework metrics will remain at the lower end of the scale
  • Related reports and contact details
  • How to contact experts in your industry
• List Of Tables
  • Table 1:Unbundling of network operators: Electricity Transmission
  • Table 2:Unbundling of network operators: Electricity Distribution
  • Table 3: Unbundling of network operators: Gas Transmission
  • Table 4:Unbundling of network operators: Gas Distribution
  • Table 5: 7 Case studies, company, country, scope
  • Table 6: Legal unbundling classification, EU 25 and Norway
  • Table 7: CEER unbundling competencies, EU 25 and Norway
  • Table 8: Datamonitor government scoring
  • Table 9: Political leaning of EU 25 + Norway, Datamonitor political scoring
• List Of Figures
  • Figure 1: Figure 1: EU network unbundling rating TSO against DSO power compliance, 2005
  • Figure 2: Power network unbundling versus Political standing of market, 2005
  • Figure 3: EU compliance score across DSO and TSO for power and gas, grouped by markets, 2005
  • Figure 4: Percentage weighting of EU compliance scores for Power TSO, Power DSO, Gas TSO and Gas DSO
  • Figure 5: EU network unbundling rating TSO against DSO power compliance, 2005
  • Figure 6: EU network unbundling rating TSO against DSO gas compliance, 2005
  • Figure 7: EU network unbundling rating* of power versus gas compliance, 2005
  • Figure 8: Power network unbundling versus total GDP (m 2004), 2005
  • Figure 9: Power network unbundling versus GDP per capita (2004), 2005
  • Figure 10: Power network unbundling versus Total electricity demand GWh (2004), 2005
  • Figure 11: Power network unbundling versus KWh per capita (2004), 2005
  • Figure 12: Power network unbundling versus network length (km), 2005
  • Figure 13: Power network unbundling versus network length per capita, 2005
  • Figure 14: Power network unbundling versus total number of power distribution companies, 2005
  • Figure 15: Power network unbundling versus number of power distribution companies per capita, 2005
  • Figure 16: Power network unbundling versus total Regulators staff numbers, 2005
  • Figure 17: Power network unbundling versus Regulators staff numbers per capita, 2005
  • Figure 18: Power network unbundling versus total Regulator budget, 2005
  • Figure 19: Power network unbundling versus total Regulator budget per capita, 2005
  • Figure 20: Power network unbundling versus Political standing of market, 2005
  • Figure 21: Outline of scoring of Datamonitor Market Competitivity Intensity (MCI) Index
  • Figure 22: Network unbundling entrenched in market framework pillars on Datamonitor's MCI Index
  • Figure 23: Effectiveness of regulator
  • Figure 24: Ease of Third Party Access
  • Figure 25: Effectiveness of balancing & data transfer
  • Figure 26: Power market scores for Effectiveness of regulator MCI category, 2005 and 2008
  • Figure 27: Gas market scores for Effectiveness of regulator MCI category, 2005 and 2008
  • Figure 28: Power market scores for Ease of Third Party Access MCI category, 2005 and 2008
  • Figure 29: Gas market scores for Ease of Third Party Access MCI category, 2005 and 2008
  • Figure 30: Power market scores for Effectiveness of balancing and data transfer MCI category, 2005 and 2008
  • Figure 31: Gas market scores for Effectiveness of balancing and data transfer MCI category, 2005 and 2008
  • Figure 32: MCI Market Framework Power market scores, 2005 and 2008, versus EU rating score, 2005
  • Figure 33: MCI Market Framework Gas market scores, 2005 and 2008, versus EU rating score, 2005
  • Figure 34: Datamonitor MCI Market Framework power scores vs EU rating, 2005
  • Figure 35: Datamonitor MCI Market Framework gas scores vs EU rating, 2005
  • Figure 36: Case studies - EU network unbundling rating of power versus gas compliance, 2005
  • Figure 37: Lietuvos Energija examples of work schedules, timeframes and actions
  • Figure 38: There are further examples of Lietuvos Energija activity plan and actions
  • Figure 39: Gasunie change in ownership structure
  • Figure 40: RWE company structure pre and post Oct 2003
  • Figure 41: RWE Rhein Ruhr AG as an example
  • Figure 42: Case studies - UK Utilities Market Context, 1990-2005
  • Figure 43: Case studies - UK Utilities Market consolidation, 1990-2005
  • Figure 44: Case studies - UK Utilities value chain system flow chart
  • Figure 45: UK retail players PES ownership, 2005
  • Figure 46: UK asset owners PES ownership, 2005
  • Figure 47: MCI country phase roll out