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Regional Electricity Markets in the ECT Area

Published in 2003

Regional Electricity Markets in the ECT Area
Региональные рынки электроэнергии в странах ДЭХ

The Energy Charter Secretariat has issued a publication entitled "Regional Electricity Markets in the ECT Area", aimed at providing a broad overview of the present status of inter-regional trade in electricity in the Energy Charter's Eurasian constituency.

Discussion of the existing barriers to regional electricity trade, and possible means of addressing them through multilateral cooperation among governments, has been a central feature of the work of the Energy Charter Conference and its subsidiary Trade Group over the last two years. The report on "Regional Electricity Markets in the ECT Area" was prepared by the Secretariat in order to facilitate this discussion and to provide background information in support of it. The text of the report has been reviewed extensively by the Trade Group, and has benefited from numerous comments and suggestions from the Energy Charter's member states and from relevant international organisations, most notably the Union of the European Electricity Industry (Eurelectric) and the Electric Power Council of the Commonwealth of Independent States.

The report analyses the present structure of national electricity markets in various parts of the Energy Charter's constituency, and assesses the present volume and growth dynamics of trade in electricity across national boundaries. Existing restrictions to trade in electricity - of a physical, legal and regulatory nature - are examined, including in the context of relevant international trade obligations applying to the Charter's member states through the WTO and the Energy Charter Treaty. Consideration is then given to how these barriers might be removed, and what economic benefits stand to be gained as a result. As part of its analysis, the report looks at how electricity is priced in various parts of the Energy Charter's constituency, how access to national electricity grids is regulated, and what plans are currently in existence for the expansion of electricity generating and transmission capacity in the Eurasian area.

Among the report's overall conclusions are that inter-regional electricity trade is very modest, despite the fact that the countries of Eurasia constitute a natural trading area for electricity. Taken as a whole, this area is, and will remain, self-sufficient in electricity, but it is economically inefficient and unnecessary to strive for self-sufficiency of each individual country. The report argues that improved arrangements for electricity trade and investment could increase economic efficiency (i.e., through economies of scale, reductions in peak loads, delayed need for expansion) without compromising the security of supply.

The report also emphasises that despite recent progress, a lot remains to be done to achieve complete liberalisation of trade and investment in the Eurasian electricity market. Liberalisation of electricity trade across the ECT area would require that all the countries involved adopt regulations securing third-party access based on non-discriminatory, transparent and predictable conditions, and that such treatment be made legally binding at international levels. The need to tackle other important barriers to trade such as monopolies and exclusive rights, and explicit import restrictions, is also discussed.

As a long-term goal, the report stresses the desirability of establishing a fully open and integrated Eurasian electricity market. In this context, the Energy Charter process has the potential to make an important contribution, through establishing common rules for international energy relations and ensuring that these rules are implemented. Such rules already exist under the Energy Charter Treaty, which extends WTO-based trade rules to energy-related trade among all its signatory states. These rules are also in the process of being reinforced through the coverage of all grid-bound energy forms, including electricity, in the Energy Charter Transit Protocol currently under negotiation.

The publication"Regional Electricity Markets in the ECT Area" is available in English and Russian.