Partie 2 ou 3 Nouvelle conomie lectrique - Centre International de ...

centre.cired.fr
  • No tags were found...

Partie 2 ou 3 Nouvelle conomie lectrique - Centre International de ...

- 15 -The case of the investments made in production in the United Kingdom between 1990 and2000 show that it was through recourse to these long-term arrangements that the situation wasable to progress. After 1990, despite the principle of non-integration of producers andsuppliers-distributors that it advocated, the regulator authorised them, because it was anxiousthat the initial production assets were initially dispersed amongst too few producers. Also, theregulator has authorised the signature of bilateral 15-year forward contracts (as they areforward, the prices are more or less independent of the spot price) between distributors andproduction entrants that were themselves minority subsidiaries of the former. Thisorganisation was enforced by the distributors’ detention of a regulated captive market towhich the overcosts could be passed through. About 15 GW of gas-combined cycle units werethus put built in this context, despite the initial overcapacity (Newbery, 2001). Contrarily, theentrants through investments made without contracts only after 1999, the so-called “merchantplants” mentioned earlier, suffered failure, because they have not a downstream supplyactivities to support the consequences of the market rules changes in 2001 in a context ofovercapacity.This “transaction cost” justification for long-term contracts is found in more conventionalanalyses that conclude there is a need to circumvent the principles that see long-term contractsas a bar to the development of competition. Newbery (1998, 2000) thus defends the interest oflong-term contracts for entries through the installation of new equipment. The main thrust ofhis proposal is disconnection between contractual price and spot market price in order toguarantee recovery of capital costs. However, as the “transaction cost” analysis points onopportunistic behaviour in this type of configuration, this contractual system is only stable ifthe purchaser is dissuaded from arbitraging between the quantities to be carried off under itscontract and those that it would purchase on the spot were there significant differencesbetween the contractual price and the spot price, and vice versa for the producer towards thepurchaser.There is therefore a real difficulty with this proposal, because of the foreseeable pricedifference between spot sales on exchanges and bilateral contracts, which is likely toencourage opportunist behaviour from purchasers when the spot market prices are geareddownwards for a long period, and vice versa. To get round this problem, the purchasers mustbe able to recover all their wholesale electricity purchase costs on their sales prices, and thiscan only be envisaged with distributors who legally preserve a significant captive sector 12 .2.4. The incentive to vertical integration of production and supplyThe specific reality in the electricity markets makes also it look logical to allow or to maintainthe vertical integration of production and supply, as the long term contractualisation is notalways easy to implement. It is seen in most European countries in which thinking oncompetition is less determined by standard market theory, and in which reformers andregulators have more or less consciously chosen to reduce the problem of future investment.12 In this same logic, it will be noted that in 2001, countries confronted with the collapse of their electricalmarkets, such as California, adopted investment incentive frameworks that responded to a principle of purchasesguaranteed at a stabilised price. In both of these cases, a specially created public agency negotiated a number oflong-term contracts with investment applicants. The electricity under the contracts was subsequently purchasedas a matter of priority by the major suppliers and distributors. The Californian contracts, negotiated during thecrisis period at $90/MWh, were at relatively low prices, at a time when crisis prices of $200 or $300 $/MWhwere very much higher in relation to the normal wholesale prices of $20-30/MWh. A lengthy re-negotiationprocedure has been started.incentives inv elec north south energy policy.doc created by Dominique Finon on 14/05/2004printed by JQ on 12/22/2004 at 11:43 15/31

More magazines by this user
Similar magazines