Deregulation of the energy market is the process of decreasing or eliminating state regulations. Energy deregulation may affect oil and gas, but for the majority of consumers, it means having the freedom to select their electricity provider and look around for the lowest prices.
Most governments changed the legislation so that the market is regulating the energy costs rather than the government. Separate from typical utility corporations, independent suppliers and other sources are now permitted to offer energy on the free market.
Deregulation in the energy market was initially caused by the 1973 oil crisis, which resulted in an abrupt rise in gasoline prices and excessive government interventions.
Consumers finally paid the price because the energy sector was unable to respond swiftly to the shifting global electricity situation.
After two decades of deregulation, we can review the idea and the results:
- You can choose from more energy providers.
- The competition leads to lower energy prices.
- The customer service is better.
- Private companies can enter the market.
- A monopoly can be avoided.
- There is a wider range of tariff models.
- More developments and innovations are available.
- Increased speed for energy transition to renewables.
- The processes in decision-making are faster.
The Result after two decades
- The energy price didn’t drop as expected.
- The administration fees went up.
- The security in energy supply decreased.
- Energy company profits have priority.
- Over the years, the market is concentrated on a few suppliers only.
- Critical infrastructure can’t be controlled by the government.
- Social aspects are not considered.
- Energy companies have to be saved by taxpayers’ money.
- Rural and underdeveloped areas are suffering from energy shortages.
In my humbled opinion, the deregulation has not delivered the promised results. While France is already on the way to nationalize EDF by buying back all shares, other countries continue to sell out. Actually, for Germany the power provider STEAG is for sale.
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Editor's note: This article was originally published in August 2022 and has been updated for comprehensiveness.