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Ownership Unbundling of Electricity Distribution Networks

Author

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  • Paul Nillesen

    (Strategy& (part of PwC) Dansk Energi, PwC, Cambridge University)

  • Michael G. Pollitt

    (Energy Policy Research Group, Judge Business School University of Cambridge)

Abstract

Traditional restructuring of power markets has focused on legally separating monopolistic transmission and distribution infrastructure with sufficient regulatory oversight to ensure non-discriminatory access to networks, and transparent and cost-reflective tariffs. There is consensus that ownership separation for transmission assets is beneficial for competition and transparency. However, at the distribution level the benefits of going beyond legal unbundling are questionable. This paper reviews the theoretical arguments for ownership unbundling and summarises the findings from 23 academic papers and consulting reports. In addition, this paper empirically demonstrates that forced distribution ownership unbundling in New Zealand (from 1998) and the Netherlands (from 2009) did not increase retail competition and did not increase network quality. It resulted in significant one-off and structural costs. The combination of increasingly active distribution networks with bi-directional power flows from distributed renewables, in combination with the digitalisation of energy supply and creation of distribution data platforms, suggests that interaction between networks and customers, traditionally separated from a regulatory and competition perspective may become more interlinked in future. Policymakers should therefore assess a broader set of policy measures, taking into account this changing network landscape, when focusing on increasing retail competition and network quality.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Paul Nillesen & Michael G. Pollitt, 2019. "Ownership Unbundling of Electricity Distribution Networks," Working Papers EPRG 1905, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1905
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    References listed on IDEAS

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    7. Sinan Küfeoglu & Michael Pollitt & Karim Anaya, 2018. "Electric Power Distribution in the World: Today and Tomorrow," Working Papers EPRG 1826, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
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    Cited by:

    1. Rabindra Nepal & John Foster & Antonio Carvalho, 2014. "Revisiting Electricity Liberalization and Security of Supply: Empirical Evidence," Energy Economics and Management Group Working Papers 7-2014, School of Economics, University of Queensland, Australia.
    2. Simshauser, P., 2020. "Merchant utilities and boundaries of the firm: vertical integration in energy-only markets," Cambridge Working Papers in Economics 2039, Faculty of Economics, University of Cambridge.
    3. Pedro H. Perico E Santos & Olivier Massol, 2022. "Electricity Distribution Systems in Europe : An Overview of Contemporary Regulatory Challenges," Working Papers hal-03897936, HAL.

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    More about this item

    Keywords

    electricity distribution; ownership unbundling;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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