EPRG 0714

Michael Pollitt

The arguments for and against ownership unbundling of energy transmission networks

EPRG 0714 Non-Technical Summary | PDF

Also published in:

• Pollitt, M., (2008), “The Arguments for and Against Ownership Unbundling of Energy Transmission Networks”, Energy Policy 36(2)

Abstract: The question this paper addresses is: what is the evidence for the superiority of the ownership unbundled transmission models (i.e. UK or Nord Pool hybrid) over other models? We assess the theoretical costs and benefits of ownership unbundling and judge these to be generally positive, though these may be potentially offset by the actual reorganisation costs of the ownership unbundling process. Next, we assess the empirical evidence. This is in two forms – econometric evidence from samples of countries and case studies of reforms in particular jurisdictions. The econometric evidence is weak due to problems with simultaneity of reform steps and a lack of studies, but the case study evidence is compelling. We conclude with a discussion of of the issues faced by countries considering implementing ownership unbundling. We conclude that evidence seems to be that ownership unbundling of transmission is a key part of energy market reform in the most successful reform jurisdictions.

Keywords: electricity reform, gas reform, ownership unbundling, transmission.