Development of the SEE electricity market — Current obstacles and way forward

The countries from the South Eastern region of Europe entered into a Treaty to establish the Energy Community, the general objective of which is the creation of a stable regulatory and market framework in order to: attract investment in power generation and transmission networks; create an integrated energy market allowing for cross-border energy trade and linked to the EU market; enhance the security of supply; and improve the environmental situation in relation with energy supply in the region. To date, significant progress has been made in terms of vertical unbundling of state-owned power utilities, regulatory reforms and institutional frameworks for regional cooperation. However, the deadline for market opening for non-household customers (January 2008) has already passed and prospects for an effective liberalization process are not yet advancing. This paper describes the main obstacles that still lie ahead for opening the wholesale market in SEE and recommendations for a way forward. Some of the mechanisms that have been proposed to enhance cross-border trade are also discussed such as the allocation of transmission capacity through coordinated auctions and the regional balancing market.