Restructuring, liberalisation and EU accession: are transition economies moving towards more sustainable electricity markets?

Panel: Panel 1. Energy efficiency – a strategic choice for Europe

Authors:
Diana Ürge-Vorsatz, Department of Environmental Sciences and Policy, Central European University
László Paizs, Institute of Economics, Hungarian Academy of Sciences

Abstract

Electricity markets in Central and Eastern Europe (CEE) are in dynamic change. Restructuring of the economies from planned to market-based ones, privatisation, liberalisation, EU accession, and the Kyoto process all shape market structures and therefore electricity supply and demand. Is it for the better or for the worse?

At the same time, energy intensities are still much higher in CEE countries than those in OECD due to the socialist legacy. Therefore, the improvement of energy efficiency is still a top priority in this region for improving energy security and foreign trade balances, for compensating for the burden of increasing energy tariffs due to the lifting of subsidies, for freeing up capital for other badly needed investments in the economy, and for a general improvement of economic efficiency. Have these changes reduced the energy efficiency gap between CEE and OECD?

The paper surveys the status of electricity sector reforms in CEE, and to what extent the factors shaping the present landscape have contributed to delivering more sustainable electricity services. The author identifies the legacies from the centrally planned economy affecting energy efficiency; reviews the progress of the reforms in overcoming these legacies and the development of energy intensities since the fall of the Berlin wall. The paper analyses the present landscape in the electricity sectors of four selected countries (Hungary, Czech Republic, Poland and Russia), and how the recent reforms, including EU accession and market opening, are influencing the sustainability of the electricity market.