A European innovation engine has said liberal power markets make both consumers and producers better off.
InnoEnergy, together with FUNSEAM and the Chair of Energy Sustainability at the University of Barcelona, has developed new models to allow regulators to assess the potential outcomes of their choices on the retail price of electricity, income transfers between producers and consumers and economic growth.
These models highlight how reductions in electricity consumption, for instance through increased regulated costs or energy conservation policies, have a negative effect on economic growth.
The report also says the market is the best mechanism to allocate scarce resources and generally makes society as well off as possible given the available resources.
Diego Pavia, CEO of InnoEnergy, said: “Electricity regulation is complex at the best of times and we found it surprising that the economic impact of these important regulatory decisions hadn’t been analysed sooner.
“These groundbreaking new models will enable regulators to better understand the power of their choices on energy costs and the uptake of renewable electricity.”
The economic models have already been validated in Germany, the UK and Spain, all of which have varying energy regulatory systems.
England recently opened its retail water market.
A new report suggests the UK’s framework to ensure energy supply needs to be made more simple, efficient and reflective of the power mix.