This book analyses the impact of electricity market reform on investment in the power industry. It considers the implications of more open and competitive markets for the security of electricity supply. Some of electricity’s uses are essential components of modern life. Security of electricity supply is an important policy objective in virtually all modern economies because of the limited possibilities for replacing electricity by other forms of energy. Adequate investment is the basic prerequisite for a secure supply of electricity.
Despite the highly-publicized problems experienced in California, the international picture is reassuring. Large investment has taken place and OECD electricity markets are generally reliable. There are, however, major investment needs in some areas, particularly in the development of infrastructures for transmission, which remains for the most part a regulated activity. Through policies and regulations, governments continue to play a key role in determining investment and security standards in a liberalised market. Energy policies on fuel use, authorisation processes, regulatory risk, capacity mechanisms and price caps, among other instruments, play a large role in promoting adequate investment or hindering it.