ER / Topics
W1.2 Organization of the Electricity Sector
Created · Updated
Key points
- Physical functions: generation, transmission, distribution, metering, system balance (TSO)
- Networks = natural monopoly → cannot compete → unbundling + regulation (access, tariffs). Generation, trade, supply → competition.
- Policy goals: affordability, availability, acceptability
- PC assumptions that fail in electricity:
- Few sellers: “oligopolistic at best” → Market Power
- No free entry: huge sunk cost of power plants
- Externalities: CO2 not included in prices
- → The market is an artifact: it must be designed. Not market vs. government: both are needed.
Concepts
- Natural Monopoly
- Unbundling
- Market Design
- Policy Goals
- Perfect Competition
- Sunk Cost
- Externalities
- Market Failure
- TSO