It is increasingly apparent that deregulating energy markets is not easy. The path is full of pitfalls and very few countries which have embarked in this course are now where they thought they would be.
Three regions of the world provide many valuable lessons in privatisation and liberalisation, for two reasons, Europe, North America and South America. Some countries in each of these regions were the first to embark on energy market liberalisation and provide many case histories, some with successful and a few with disastrous outcomes. Another interesting factor in Europe and the US is the combination of local and central markets; in the US federal versus state and in Europe national versus the EU. Market deregulation has given an impetus to the emergence of a small number of very large players which are increasingly dominating national markets and, some believe, threatening competition.
The European energy markets have been subject to extensive legislation, introduced by the EU for the 15 old members and extended with varying degrees of compliance negotiated with the 10 new members who joined in 2004, and the 2 members who joined in 2007 and candidate countries.
In 2010, the European Union produced 6% of the world’s natural gas, the bulk of it from the North Sea, and consumed 16% of the global total. 26% of imports came from Russia, 12% from Algeria and 8% from Qatar, with 36% being exported from Norway and the Netherlands to other European countries. The energy profiles of the various European countries vary widely. The UK, Netherlands and Norway are the big three natural gas producers. The UK is the largest consumer, followed by Germany, with Italy in third place. The Netherlands uses around half as much as Germany or the UK and hydro rich Norway almost none. Germany and Italy are largest importers. Norway and the Netherlands are by far the leading exporters.
Liberalisation of the natural gas industry has run in parallel with the liberalisation of the electricity sector but with distinct differences. There have been three Gas Directives, in 1998, 2003 and 2009. The key provisions of the 1st EU Gas Directive, 1998 were to establish the following conditions; non discriminatory access to gas infrastructure, unbundling of accounts of monopoly activity, market opening timetable, and dispute settlement authority.