Sep 1998

The power sector in Central and Eastern Europe is in a parlous state, even after a decade of economic reform in those countries. Private investment is needed, but has so far been very limited. While basic economic indicators are showing stable conditions for growth, most countries have so far failed to ensure the right institutional environment for private power investment. When it materializes, there should be numerous opportunities in rehabilitation and cogeneration. Denis Clarke International Finance Corporation, Washington

The German electricity market is on the verge of major restructuring following the passage of the country’s new energy law. The introduction of competition at all levels will challenge the existing utilities’ positions, and only those which can marshal the correct strategies will win. The existing three-tier structure of the industry will change as new alliances and mergers are formed to extract value across the supply chain. Dr Peter Preußer Director, RWE Energie AG, Germany

The revolution in the US electricity market is challenging utilities to adapt or become extinct. Effectively responding to the new demands of shareholder value and risk management requires new tactics. One strategy that promises to increase value is to integrate across the entire energy chain, which should provide opportunities for minimizing risks. An indication of the value that companies place on assets which can be incorporated into these broader regional plans can be seen from the bids placed in some of the recent divestitures of utility-owned generation. William Burke & David Haarmeyer Stone & Webster Consultants, Boston

While construction of reactors is only happening in the far east, a sizable proportion of power in developed economies is generated by nuclear stations. These have considerable life in them yet, but this can only be realized if their output can compete on price with the best in the market. Experience in France, the UK and the US suggests that existing assets can be run efficiently if appropriate attention is paid to operation and maintenance. It seems unlikely, however, that a case can be made to build new units in liberal marketplaces. Dr Gordon Edge Editor, Power Economics

Continental Europe’s first electricity exchange is taking shape. While the Amsterdam Power Exchange (APX) still faces challenges, most of the critical issues have been resolved and concrete steps towards its implementation are being made. The emergence of a spot market for electricity represents a quantum leap in the European liberalization process. The exchange is a tool that will fundamentally alter the way utilities operate with implications beyond the boundaries of the Netherlands. Dr Michael Kraus PricewaterhouseCoopers, Berlin

Chile has been amongst the pioneers of restructuring and liberalization of electricity. As far back as 1982, it introduced reform legislation aimed at bringing competition and private investment into the sector, which has brought about the expansion of capacity necessary to meet growing demand in this developing economy. Reform in Chile has also brought competition in installing transmission lines and gas pipelines as well as power plants. Ricardo Raineri & Hugh Rudnick Catholic University of Chile, Santiago