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

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

- 21 -Some people have explicitly proposed playing on the shortcomings of the competition-basedmodel in order to answer the requirements of long-term investment. A good example of thisapproach is that of the Inter-American Bank specialists mentioned above (Millan, Lora &tMicco, 2001), who twisted the standard principles to a considerable extent in the name of theneed to develop capacities. They put forward three solutions.- First, they considered that in the systems reformed on the basis of a de-integrated modelof the British type, the exercising of market power by a small number of producers shouldnot be criticised in the last analysis, because by producing higher prices it allowed theattraction of entries and therefore stimulated the development of new capacities (op. cit.,p. 33). The exercising of market power in a period of capacity-related tension is thereforewelcome, as the entries that it produces will allow scarcities to be reduced and even theproblem of concentration to be lessened. The objection will be raised that the efficiency ofthis way, based on market imperfection, cannot be demonstrated for two reasons: thecaustiousness of investors confronted with the volatility of the markets, and theunavoidable problem of social acceptability of price peaks as an incentive to investment.- Next, they consider (and this is similar to the observation made above about the need toaccept arrangements that fly in the face of the standard competition-based model), that ona market with a specifically high price volatility, investors must embark on long-termcontracts that move the risk onto other market participants, the distributors or the largeconsumers. This is the solution put forward by D. Newbery (2001), who argues that therisk of interruption to supply and the increased volatility of market prices create incentivesamongst some categories of actors who want stability of supply and guaranteed prices tosign long-term contracts with prices disconnected from the spot market prices, or toconstruct and operate their own electricity-producing equipment. In fact, there are severalmajor electricity purchasers within the electricity-intensive industries who have proceededin this way in some countries, or have developed their own capacity by selling theirsurpluses to the network. This method, which incidentally is a return to one of thedevelopment paths followed by some electricity industries (Scandinavia, some Alpinecountries, Canadian provinces) in the late 19 th and early 20 th centuries, must however be asecondary route only. From the purchasers’ point of view, in fact, few consumers will beinterested in involving themselves in this vertical integration solution.- Finally, they call for a transparent and stable institutional environment for enforcing IPPcontracts but they consider that if it is not produced, one can, as a last resort, make thebest of the institutional weakness. The possibility of capture of the public authorities(government or regulator) by industrial interests could in itself be an investmentconduciveenvironment.As seen before in the case of the European reforms, the twisting with the basic principlesbehind the competition reforms for helping investment are not the monopoly of the reformersin the South countries. But there is much less guarantee that it avoids large inefficienciesbecause of the absence of self-control mechanisms that exist in the European countriesbecause of existing institutional equilibria (see above). So, in the case of developing oremerging countries, when faced with this theoretical twisting, one should in fact reverse theprocess of thinking. It appears much more logical to design reforms around the need toenforce commitments in investments by creating public governance by long-term coordinationand reduction of investment-related risk through long-term contracts.Complementary measures to give credibility to the commitments of the “single buyer” mustdeal with a radical correction of the public monopoly model by an industrial organisation lessincentives inv elec north south energy policy.doc created by Dominique Finon on 14/05/2004printed by JQ on 12/22/2004 at 11:43 21/31

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