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Electricity Supply in the New Century

Electricity Supply in the New Century. Dr Malcolm Kennedy Chairman PB Power Ltd including the power businesses of Merz and McLellan and Kennedy & Donkin. The UK Government main proposals for the privatisation of the Electricity Supply Industry in England and Wales; Feb 1988

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Electricity Supply in the New Century

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  1. Electricity Supply in the New Century Dr Malcolm Kennedy Chairman PB Power Ltd including the power businesses of Merz and McLellan and Kennedy & Donkin

  2. The UK Government main proposals for the privatisation of the Electricity Supply Industry in England and Wales; Feb 1988 • Decisions about the supply of electricity should be driven by the needs of customers. • Competition is the best guarantee of the customers’ interest. • Regulation should be designed to promote competition, oversee prices and protect the customers’ interest in areas where natural monopoly will remain. • Security and safety of supply must be maintained.

  3. Average Price (p/KWh) 8 - 7 - 6 - 5 - 4 - 3 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Price reductions since privatisation Average real price of electricity for the standard domestic tariff in England and Wales

  4. Business Profits (% of turnover) 1992/3 1994/5 1996/7 1998/2000 Generation 9 14 19 Transmission 26 36 36 Distribution 42 43 43 Supply 1 2 1

  5. The UK story - so far • Competitive and non-competitive elements in the industry • identified • Differing corporate strategies apparent • Varying entry into overseas markets • Vertical integration and mergers with other utilities • Takeovers by overseas companies • Merging of supply and other service businesses • Persistent government and regulatory intervention • Diminishing market power in generation and divestment • of generation plant • Merger policy • Pool Review, introduction of NETA • Fuel policy and the environment • Benefits • Consumers • Shareholders • Government

  6. European Union (EU) electricity liberalisation • Competition in generation • Free market entry, no planning or central planning, competitive tenders • Competition in supply • Negotiated 3rd party access • Access into single buyer system • Enforced market opening • 22% in 1999 at least 33% by 2003, differing rates of opening • Transmission charging • Is competition ‘real’ or imaginary

  7. Main Regions of Activity in Deregulation of Electricity Supply Industries • EU and Accession Countries of Central Europe • North America • South America • Australia & South East Asia

  8. Principal Liberalisation Activities • New-build generation & IPPs • Trading in existing generation, transmission & distribution assets • Competition in generation and supply • Regulation & price control of monopoly businesses • Rapid Development of renewables? • Power exchanges/pools and data transmission

  9. Abundant Fuel ? • Natural Gas • Coal • Oil and other hydro carbons • Hydro • Nuclear • Renewables

  10. Post-Kyoto Development: Renewable and ‘Efficient’ Energy Sources • Combined heat and power • Energy-from-waste • Wind • Fuel cells • Photo voltaic cells • Bio mass • Mini hydro

  11. Emissions controls • Emissions trading • CO2 capture and storage • Demand side management Other Post-Kyoto Developments:

  12. Transmission & Distribution Developments • ‘Squeezing’ additional capacity • Extending asset life • Better protection and control • Higher availability and security of supply • Better quality of supply • Reduced maintenance costs • Embedded generation

  13. Worldwide Trends • Dividing utilities into generation, transmission, distribution and supply businesses. • Widespread introduction of independent Power Producers. • Splitting existing generation into two or more competing companies - sometimes. • Operation in accordance with Codes and Licenses and more accountability to external bodies. • Choice for customers - sometimes. • Mergers, acquisitions and global investment pattern. • Environmental law enforcement and rise of renewables. • Power Pools, where possible. • Increases in efficiency - but who benefits?

  14. Effects on shareholders and their companies • Power companies will merge and get bigger and there will be fewer but bigger global companies. • Mega-Utilities will emerge. • Efficient companies will take over inefficient companies. • Obligation to meet toughening environmental laws means more renewables. • Further move towards gas and eventually new investment in nuclear. • More accountability, with monopoly businesses under more scrutiny. • ‘Steady’ stock market performance except if excessive risks taken overseas.

  15. Governments and Regulators will: • Not abandon ESI to ‘a free market’. • Ensure customer interests, affordability and environmental requirements are applied. • Insist on transparency of business. • Not allow customer and shareholder interests to get out of balance. • Oversee rise in Eastern Europe and Middle East electricity prices. • Have to deal with “cherry picking”.

  16. Customers will: • See prices change for some time then stabilise. • Enjoy improved customer service response from power companies. • Have security, quality and reliability safeguarded, if not improved. • Live in a cleaner environment. • Still take their electricity at 240v and 50Hz (in most of the world).

  17. Electricity Supply in the New Century Dr Malcolm Kennedy Chairman PB Power Ltd including the power businesses of Merz and McLellan and Kennedy & Donkin

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