WORLDWIDE MARKET RESEARCH REPORT - CISE

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EC/IST FP6 Project No 026920 Work Package: 6 Type of document: Report Date: 20.12.2007 File name: OP_WP6_D37_V1.0.doc Version: 1.0 Title: Worldwide Market Research Report 180 / 356 5.3.8.1 Barriers Figure 5-22 IT spend as % of GDP in Eastern Europe The greatest barrier for the diffusion of the PLC technologies in Eastern Europe is the status of the electric grid, both from the point of view of the infrastructure (it is often very old and partially damaged), both from the point of view of the management: in almost all the countries of the Eastern Europe, the electric grid has been for a lot of time of exclusive ownership of the state (especially in the ex-communist countries), that has left the prices low. With the opening to the capitalism, many citizens would be now unable to pay a “market” price for the supply of the electrical service. Nevertheless the increasing capitalization of the sector and the need of private funds for improving the conditions of the electric grid, have necessarily to increase the prices of the electric energy.
EC/IST FP6 Project No 026920 Work Package: 6 Type of document: Report Date: 20.12.2007 File name: OP_WP6_D37_V1.0.doc Version: 1.0 Title: Worldwide Market Research Report 181 / 356 [E27] Worried by resurging inflation, the Russian government scrapped its plan to allow the Federal Energy Commission to fix tariffs for gas, power, and railways. Electricity throughout the former Soviet bloc is heavily subsidized. Governments are reluctant to raise prices to realistic levels lest they incur the wrath of their impoverished subjects and reignite dormant inflation. Fuel prices, government taxes, and variable costs, such as labor, have been rising steeply in the last decade but the electricity behemoths' ability to amend their tariffs to reflect these is politically curbed. The Russian Unified Energy Systems electricity monopoly was allowed to up its prices this year by a mere 14%, barely the rate of Russian inflation. Its chances to attract the $50 billion in investments it says it needs in the forthcoming 10 years are slim as long as it continues to charge its customers (both wholesale and retail) a fraction of the cost of electricity its West European counterparts charge theirs. A restructuring plan, approved by the government in May 2001, is going nowhere. The sale of loss making generating plants (even at bargain basement prices and to insiders) is impossible without a massive (and massively unpopular) boost to electricity prices. Vociferous protests in Croatia last month forced the government to shelf a scheduled 9% hike in the price of electricity for domestic consumption. The IMF is displeased with the government's stranglehold over the energy sector and is pushing for liberalization. Slovakia's news agency, TASR, reported that thousands of members of the Trade Unions Confederation demonstrated in Bratislava against proposed budget cuts and increases in regulated prices, including electricity's. Still, consumers will not be able to buck the trend forever. Even the rich countries of the region are facing already unsustainable electricity subsidy bills. The Slovenian news agency, STA, reported that Slovenian producers of electricity and natural gas warned that (once the domestic market opens to foreign competition) they will be at a disadvantage due to the unrealistic electricity "price model". Yet, liberalization and privatization have acquired a bad name after the debacles in California and elsewhere in the world. Moreover, electricity generation depends on a free market in fuels: a rarity in central and Eastern Europe. Prices cannot rise above the increase in net disposable income.
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WORLDWIDE MARKET RESEARCH REPORT - CISE

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