Liberalisation of the energy market (electricity and gas)

One of the main objectives of the EU energy policy is to ensure the functioning of the internal energy market. The milestones for the integration of the EU energy market were three liberalisation packages applicable to the electricity and gas markets, of which the latest was adopted in 2009. Despite this, the EU energy market remains rather fragmented into sub-markets with limited cross-border trade and competition, all coming as disadvantages for consumers.

Originally, energy supply was a natural monopoly comprising production, distribution and trading. Liberalisation separated these components and created regulation schemes for activities where the monopoly had to stay (typically transmission and distribution) and a competitive market for energy trading. The liberalisation process was typically gradual starting with large consumers. In spite of this, this process of liberalisation of the energy market is still not completed in the EU. Also, there is still a big difference in the regulation of energy markets among Member States. The 2014 Market Monitoring Report provides an assessment of the progressese achieved by European countries with reference to the competition in electricity and gas markets. According to the report, European countries still have widely different retail regulatory frameworks, in particular with regard to price regulation and consumer protection. This in turn leads to different levels of market competition.

The EU energy market for electricity and natural gas is liberalised in most countries since 2008. The liberalisation created the conditions for the entry of new energy providers in the market. This established a competitive environment which was supposed to lead to a reduction of energy prices and improve the quality of the provided services.

Also the Energy Efficiency Directive includes targets to remove national technical or administrative barriers to the proper functioning of the internal energy market or of the underdeveloped labour markets, in order to match the low-carbon economy challenge, as many of those barriers are still relevant.

The important factor is the duration of the liberalised market since that time. For the  electricity market, it is almost 9 years on average in the EU (ACER, 2014). Another indicator is the mobility of consumers regarding their energy providers or tariffs, which is expressed by the so called 'switching rates', that has the objective of optimising the service conditions and reducing the annual cost of energy. All these indicators are gathered and published separately for electricity and natural gas.

The following indicators show the final stage taking into account the market conditions in force for all end-consumers.

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