MorganEnergy

Where will be find the next big crop of energy industry privatizations? The Wall Street Journal thinks that it might be in Turkey. Justification for this is based on a prediction from a Turkish think tank which believes that the country’s energy sector is desperately in need of investment – a projected requirement of $125bn over the next 12 years. Selling off companies to rich foreigners would certainly be one way to make that happen. And indeed some sales are already happening. However, ongoing tensions between various factions in Turkish politics may not provide the sort of comfortable environment that big investors prefer.

Knowledge Problem is a general economics blog run by Lynne Keisling of Northwestern University assisted by Michael Giberson. Many of the posts are about energy issues. Yesterday Lynne took Rebecca Smith of the Wall Street Journal to task for yet another one of those articles that looks at a market that is having problems (in this case Texas) and claims that all of those problems are caused by deregulation.

According to Platts the long-delayed capacity market in the Russian electricity sector will open at last on July 1st. Russia’s energy minister, Sergey Shmatko, is quoted as saying, “I hope everything will be all right.” Doubtless there was more spin on that in the original Russian.

Further information about industry restructuring in Russia is available via the RAO web site. A wholesale energy market has been operating since Sept 1st 2006 (though thanks to what appears to be another quirk of translation this is described as a “capacity” market).

Further to our discussion of EU market liberalization, RWE has announced that it will follow E.ON‘s example and look to sell off its gas transportation network in order to settle the anti-trust case being brought against it.

Energy market liberalization in the EU has been a difficult process and is likely to remain so. While some countries, notably the UK, have gone full steam ahead into creating fully competitive markets within their own borders, other countries, in particular France and Germany, have concentrated on developing “national champions” that will be able to compete in the expected Europe-wide energy marketplace. It is no accident that most of the UK’s energy companies are now owned by large European firms.

But before that European marketplace can properly develop, the stranglehold of the national champions on their home territories has to be broken. Naturally, those companies see no reason to give up their privileged position, and have been happily cooperating with each other to divide up Europe between them. This has led the European Commission to open anti-trust proceedings – see for example this Forbes report on investigations into the behavior of E.ON, Gaz de France (GdF) and RWE in Europe’s gas markets.
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