Security of supply in liberated electricity markets - key issues and experiences in OECD countries (work in progress)

Security of supply of electricity could in principle refer to any parts of the value chain from fuel input to delivery of electricity to the final costumer with the expected quality. Concerns about security of supply are usually focused on three aspects: Timely and adequate supply of the input fuel for electricity generation is a prerequisite - security of energy supply. There has to be timely and adequate infrastructure in place to transform the input fuel into electricity and transport it to the final costumer - adequacy of generation and transmission capacity. Finally, it is an operational challenge to make the electricity system work and deliver at the expected quality - secure operation of the electricity system. Security of supply becomes relevant in a policy context from concerns about market failures in any parts of the value chain or, indeed, from the perspective that policy will set the framework for markets to serve as an instrument to secure the supply. This paper discusses some of the experiences with security of supply concerns and market failures in these three basic segments of the value chain; fuel input, adequate generation and transmission capacity and secure operation of the system, with an emphasis on the role of the market to serve as an efficient instrument. In the aftermath of the large black outs of electricity systems in North America, Italy and Sweden/Denmark IEA initiated a project on 'Transmission Reliability and Power System Security in Competitive Electricity Markets'. The results of this work will be published towards the end of 2005. After a decade with liberalised electricity markets in some pioneer regions, IEA now also finds it timely to analyse some of the lessons in a forthcoming publication. Recent and ongoing IEA-work thereby covers all the main aspects of security of supply. This paper summarises the key findings and messages, with a focus on the work in progress on lessons from liberalisation