Transcript Studie - Ownership unbundling

Ownership Unbundling
– The appropriate route to increased competition? –
Results of an A.T. Kearney study
Brussels, February 13 2008
Agenda
Page
 Effects of Ownership Unbundling
3
 Drivers of competition in the electricity market
15
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2
Effects of Ownership
Unbundling
A.T. Kearney 77/01.2008/4729w
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Effects of Ownership Unbundling
In EU-15 the majority of countries have implemented
Ownership Unbundling on transmission level
Unbundling among EU-15 Transmission Operators – Overview1)
• Ownership Unbundling postulated by the EU
Commission has already been implemented on
transmission level in many countries
• Germany, France, Austria and Greece are the
only countries in the EU-15, that have
implemented Legal Unbundling
• Ownership Unbundling on distribution level has
been realized in Great Britain only, while Legal
Unbundling is a European-wide standard
• According to the EU Commission "ownership
unbundling has a number of positive impacts
on the market by stimulating investment in
particular in interconnectors, reducing market
concentration and bringing down prices."
Is this a fact?
Legal Unbundling
Ownership Unbundling
Independent System Operator
1) Status 1. January 2007 incl. Norway, excl. Luxemburg
Source: Regulatory authorities, EU Commission, A.T. Kearney
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Effects of Ownership Unbundling
Networks in countries with Legal Unbundling have been
more reliable in recent years
Unplanned Interruption
(minutes lost per customer, average 2004-2006)
174
162
152
140
135
124
95
91
84
54
36
Ø
NOR
Legal Unbundling
(1)
(2)
IRL
FIN
PT
Ownership Unbundling
(3)
IT
(2)
ESP
(3)
SWE
(2)
UK
FR
(2)
AT
30
DK
(4)
29
24
NL
DE
(2)
Independent System Operator
1) Norway started detailed interruption recording in 2005; 2) 2004-2005;
Source: E-Control, Fingrid, VDN, TenneT, CEER, EU Commission
3) only 2004;
4) only 2005
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Effects of Ownership Unbundling
Electricity prices for household customers increased
across all countries in Europe…
Development of Prices for Households 1998-2007(1)
(in ct./kWh)
Average CAGR 1998-2007
Ownership Unbundling: +3.0%
Legal Unbundling:
+0.7%
18
IT
16
IRL
DE
PT
NL
NOR
UK
BE
DK
SWE
AT
ES
F
FIN
14
12
10
8
GR
6
4
1998
Legal Unbundling
1999
2000
2001
2002
2003
2004
2005
2006
2007
Ownership Unbundling
1) Consumption of 3.500 KWh p.a without tax
Source: EUROSTAT, A.T. Kearney
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Effects of Ownership Unbundling
…for industrial customers the trend is the same
Development of Prices for Industry 1998-2007(1)
(in ct./kWh)
Average CAGR 1998-2007
Ownership Unbundling: +4.0%
Legal Unbundling:
+0.9%
12
IRL
11
IT
UR
DE
BE
PT
ES
10
9
8
NOR
GR
DK
SWE
FIN
F
7
6
5
4
3
2
1998
Legal Unbundling
1999
2000
2001
2002
2003
2004
2005
2006
2007
Ownership Unbundling
1) Consumption of 2.000 MWh p.a without tax
Source: EUROSTAT, A.T. Kearney
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Effects of Ownership Unbundling
Wholesale prices in legal unbundled countries did not rise
faster than in ownership unbundled countries
Development of Wholesale Prices
Germany 1)
CAGR
46,3 48,7
+15.2%
30,1 30,1 30,3 30,2
29,5 29,0
26,1 25,9 25,6 24,6
24,1 22,5
20,8
-31%
EEX Spot prices
(Base in Cent/kWh)
In 1998, liberalization started
for all customer groups in one
step
1992199319941995 1996199719981999200020012002 2003200420052006
CAGR
+21.2%
-54%
Sweden
260,0
210,9
252,4
459,6
333,0
256,3 276,5
Gradual liberalization between
1996 and 1999
143,8 120,5 119,4 120,4
Nordpool Spot prices in
(SEK/kWh)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-28%
Great Britain
103,6 100,0
CAGR
+25.2%
94,3 93,4 94,0 87,1 79,7 76,8
74,4 81,1
145,9
108,6
Gradual liberalization between
1991 and 1998
IEA Wholesale index in %;
(1996 = 100)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Liberalization Period
1) until 1999 IEA Wholesale price index, as of 2000 EEX Spot Base
Source: EEX, Nordpool, IEA Wholesale price index, A.T. Kearney analysis
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Effects of Ownership Unbundling
Except for Great Britain, there is no clear correlation
between type of unbundling and investment activities
Investments into the grid/transmission volume1)
Selection
(in €/GWh)
2466
1456
1376
1369
1284
1146
1099
847
738
718
279
National Red
StatNett Verbund
Grid Electrica
Legal Unbundling
EON Energinet TenneT
233
Terna Vattenfall FinGrid Svenska RTE EDF
Kraftnät
Ownership Unbundling
1) 2004 to 2006
Source: A.T. Kearney Analysis
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Effects of Ownership Unbundling
Even the development of cross-border transmission
capacity lacks consistency
Development of cross-border transmission capacity 2000-2006
(in %)
225%
157%
115%
96%
70%
61%
54%
54%
39%
26%
23%
2%
-9%
Ø
BE
Legal Unbundling
PT
AT
ES
IT
NL
FIN
DE
F
NO
SE
DK
Ownership Unbundling
Source: UCTE, Nordel, A.T. Kearney Analysis
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Effects of Ownership Unbundling
No clear correlation in the ratio import capacity/generation
capacity can be identified
Average import capacity/generation capacity1)
(in %)
50%
29%
25%
24%
17%
16%
14%
14%
10%
EUZiel
12%
9%
DK
Legal Unbundling
SW
BE
AT
NL
DE
FR
FIN
GRE
PT
6%
6%
6%
IRL
ES
IT
2%
UK
Ownership Unbundling
1) 2006
Source: ETSO, A.T. Kearney
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Effects of Ownership Unbundling
In absolute terms, grid access tariffs in Europe differ
widely and are not linked to ownership unbundling
Transmission tariffs 20061)
(in €/MWh)
10,3
10,1
8,6
8,4
7,5
7
7,1
6,4
5,5
5,3
5,3
5
4
3,1
3
2,9
2,2
Ø
DK
East
Legal Unbundling
IT
IRL
UK
GRE
Ownership Unbundling
DE
POR
DK
West
ES
FRA
AT
BE
NL
NOR
FIN
SWE
Independent System Operator
1) Except for other regulatory changes that are not directly linked to TSO activities such as standard costs, public
interest, renewable energies etc.
Source: ETSO, A.T. Kearney
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Effects of Ownership Unbundling
No correlation between grid tariffs development and type of
unbundling can be observed
Development of Transmission Tariffs 2003-2006
(Index 2003=100)
CAGR 2003-2006
IT
200
Average CAGR 2003-2006
Ownership Unbundling: +0.1%
Legal Unbundling:
-0.1%
180
21,7%
ES
7,2%
DE
4,1%
160
DK EAST
3,8%
140
UK
3,4%
120
FRA
-0,6%
PT
-1,0%
SWE
-1,5%
100
80
FIN
-3,2%
AT
-3,7%
NL
-4,0%
60
40
20
DK WEST
0
BE
2003
Legal Unbundling
2004
Ownership Unbundling
Source: ETSO, A.T. Kearney
2005
2006
-5,3%
-8,4%
NOR 11,3%
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Effects of Ownership Unbundling
Networks in countries with Legal Unbundling are more
reliable – grid tariffs below average
Backup
Summary Unplanned Interruptions vs. Grid Tariffs
Grid Access Tariff TSO
(in €/Mwh)
Ø 91
DK East
15
DK West
IT
UK
10
IRL
DE
Ø 7.0
FR
AT
ES
NL
SW
FIN
5
NOR
0
0
25
Ownership Unbundling
Legal Unbundling
50
ISO
75
100
125
150
Interruption Time
in minutes lost per customer (Ø 2004-2006)
Source: E-Control, Fingrid, VDN, TenneT, CEER, EU Commission, ETSO, A.T. Kearney analysis
175
200
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Drivers of competition in the
electricity market
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Drivers of competition in the electricity market
In competitive development certain stages with certain
characteristics can be observed
Stages of competitive development
Market
development
Market opening
Tenure of regulatory
authorities
2005
Grid Access
tariffs
1989-1998
1999-2001
7,2
Household
customers market
opening 2007
6,7
Household
customers
market
opening 2007
6,2
5,3
5,1
4,7
5,0
4,8
4,8
4,0
4,0
3,7
3,3
2,5
Ø
LUX
IT
DE
AT
BE
IRL
DK
FRA
NL
SWE
2
Retail
margins
3,7
FIN
POR
UK 2)
ES
High competitive
retail markets
3,5
+551%
+290%
2,97 3,14 3,04
2,10
1,42 1,26
0,86
0,51 0,46 0,44
0,25 0,26
Retail Margin Households 2006
(in ct/kWh)
1
Competitive
market
3
2,5
2
1,5
1
Low competitive
retail markets
0,5
0
0%
10%
20%
30%
50%
60%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
SWE
FIN
UK
IT
IRL
DK
NOR
DE
AT
LUX
ES
BE
POR
FRA
GRE
NL
0%
Source: A.T. Kearney
0%
Households
N/A
90%
Industry
80%
N/A
90%
N/A
3
Churn rates
40%
A
N/A
D
UK
NOR
FIN
SWE
ES
POR
DK
NL
BE
IRL
DE
AT
FRA
GRE
LUX
IT
S
N/A
UK
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Drivers of competition in the electricity market
First the regulator reduces grid tariffs through cost and
incentive regulation
Grid Access Tariffs Low Voltage1)
(in ct./kWh)
Tenure of Regulatory
Authorities
Household
Customers
Market
Opening 2007
2005
1999-2001
7,2
1989-1998
Household
Customers Market
Opening 2007
6,7
6,2
5,3
5,1
4,7
5,0
4,8
4,8
4,0
4,0
3,7
3,7
3,3
2,5
Ø
LUX
IT
1) Status 2005
2) Estimated mean value
Source: Eurelectric, CEER, A.T. Kearney
DE
AT
BE
IRL
DK
FRA
NL
SWE
FI
N
POR
ES
UK 2)
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Drivers of competition in the electricity market
A decrease in grid tariffs increases retail margins and
makes alternative suppliers more competitive
Retail Margins Electricity – Households1)
(in ct/kWh)
High Competitive
Retail Markets
2,97 3,14 3,04
2,10
1,42 1,26
0,86
0,51 0,46 0,44
0,25 0,26
Retail Margin Households 2006
(in ct/kWh)
3,5
3
2,5
2
1,5
1
Low Competitive
Retail Markets
0,5
0
UK
2004
S
2005
2006
D
A
0%
10%
20%
30% 40%
50%
Cumulated churn rates
(in %)
1) GWh
2) Annual Consumption: 3.500 kWh; Retail margin is calculated by taking the energy component (retail prices less
taxes and grid tariffs) and deducting wholesale future prices. For UK spot prices where taken.
Source: EUROSTAT, UKPX, Nordpool, EEX, EEXA, EU Kommission, regulatory authorities, A.T. Kearney Analysis
60%
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Drivers of competition in the electricity market
In particular lengths and type of regulation drive
competition in the European electricity markets
Competition drivers
Regulatory experience
• The longer a regulator is installed in a market, the better the competition
• Experience shows (e.g. in Great Britain and Scandinavia), that establishing
a working regulatory system as prerequisite for competition requires a few
years
Low grid tariffs/attractive retail margins
• Countries with a longer regulatory experience have lower grid tariffs and
higher retail margins
• New suppliers require comfortable retail margins for a sustainable interest in
the electricity market
Market integration
• Only an integrated European electricity market ensures variety and increase
in number of suppliers on the generator side  large market shares in
regional markets reduce in a European market
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Drivers of competition in the electricity market
Actions to stimulate competition should orientate towards
identifiable drivers of competition
Actions to stimulate competition
1
Effectively
harmonized regulation
in all markets
• Raise transparence standards on a common level across Europe, e.g., in
terms of invoice information on utilities, price changes etc.
• Simplify and accelerate churn process
• Ensure grid access for new players, e.g., improve data provision through
grid operators
Tougher
implementation of
Legal Unbundling on
all grid levels
• Across Europe the current legal framework is not leveraged in the sense
of the objective
• Intensification of Legal Unbundling, e.g. asset transfer, increased
independence through incorporated company with independent
representatives in advisory board and allocation of grid activities to grid
company
Investment
guidelines to all EUcountries for crossborder transmission
capacities
• A domestic electricity market in Europe can in the long term only be
achieved by high performing transportation grid connections
• Legally binding provisions for the realization of grid connections are
imposed for all EU-member states
2
3
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