Energy Market Reform

Governments have recognised that in most cases energy market reform allows markets to operate more efficiently and cost-effectively.

However, there are continuing reasons for governments to remain involved in energy markets: long-term uncertainties, the fact that markets do not always take account of environmental and social objectives (including safety and health concerns), the continued monopoly nature of natural-gas and electricity transmission grids, and the global nature of some problems such as climate change.

All these examples offer a rationale for a continuing government role.

When market prices do not fully reflect environmental and social costs, consumers’ choices are distorted. Sending an appropriate market signal to encourage environmentally rational energy use – including by reducing consumption and changing its composition in favour of more environmentally friendly goods and services – may be accomplished through a variety of economic instruments, from direct taxes to tradable permits.

The policies will need to take into account national circumstances.

Renewable energy commercialization

Involves a broad, diverse array of technologies, including solar photovoltaics, solar thermal power plants, solar heating and cooling systems, wind power, hydroelectricity, geothermal, biomass, and ocean energy systems.

The current status of these different technologies varies considerably. "First-generation" technologies are already mature and economically competitive, "second-generation" technologies are market ready and are being deployed at the present time, and "third-generation" technologies require continued R&D efforts in order to make large contributions on a global scale.

While there are many "non-technical barriers" to the widespread use of renewables, climate change concerns coupled with high oil prices and increasing government support are driving increasing growth in the renewable energy industries. Investment capital flowing into renewable energy climbed from $80 billion in 2005 to a record $100 billion in 2006.

Leading renewable energy companies include: Acciona, Gamesa, GE Energy, Q-Cells, Sharp Solar, SunOpta, and Vestas.