Security of Supply in Liberalized Energy Markets

Event context  

Policymakers on both sides of the Atlantic have traditionally viewed energy as a "strategic sector" of the national economy that could not be left to its own devices. As a consequence, both in Europe and the United States, government involvement in the energy sector has been extensive and deep, either through stringent regulation or public ownership, or both. The liberalization of energy markets was long deemed impractical or unattractive, for various reasons, economic and political.

During the past two decades, however, policymakers in the US and Europe have taken first steps to fundamentally reorganize their energy markets. A general wave of economic liberalization and the successful transformation of other basic services (telecommunications, transportation, etc.) during the 1980s made reform of the energy sector seem possible and desirable to enhance the competitiveness, efficiency and sustainability of energy markets. At the same time, issues related to security of supply—traditionally a key concern of those who wanted to keep a tight public grip on the energy sector—slipped into the background.

Despite setbacks and slow progress due to the complex political, economic and regulatory issues involved, political support for the liberalization of energy markets remained strong on both sides of the Atlantic for much of the 1990s. However, at least since the world oil price hikes in 2000 and the Ukrainian gas crisis in late 2005, some analysts and policymakers have started to question the wisdom of energy market liberalization. The principle question they raise is whether the liberalization of energy markets has the potential to undermine "security of supply," broadly defined as reliable energy supply at reasonable cost. While it is widely accepted that the privatization and deregulation of energy markets (if properly managed) can generate efficiency gains, some observers have grown concerned that private energy markets may not be able to effectively address a range of issues related to "security of supply."

Event objectives

This second "Transatlantic Energy Security Dialogue" session, in collaboration with the German Marshall Fund of the United States and with additional financial support from Credit Suisse, provided a forum to review liberalization experiences in the EU and the US, and addressed several issues at the nexus of liberalized energy markets and the "security of supply" debate. While appreciating the fact that energy markets in the EU and the US are structurally different, the conference seeked to draw out best practice benchmarks with regard to approaches in energy market liberalization and regulatory models designed to facilitate competition while safeguarding security of supply.

The format of the conference included two panel discussions which focused on (i) the impact of energy market liberalization on security of supply and (ii) meeting future energy needs in the context of liberalized energy markets. Following the two panels, small working groups were formed to address various questions relating to each panel topic, all of which included a short introductory presentation by an expert on the issue.  

The event was chaired by GPPi Associate Director Jan Martin Witte and included a number of top experts from both the US and Europe, including: Richard P. O'Neill, Chief Economic Advisor, US Federal Regulatory Commission; Rolf Hempelmann, member of the German Parliament (SPD); Alex de Alvarez, Deputy Director, Infrastructure Security and Energy Restoration, US Department of Energy; Ulrik Stridbaek, Senior Policy Advisor, International Energy Agency; and Felix Würtenberger, Senior Advisor, Energie Baden-Würtemberg (EnBW), among others.