Global Evolution of Power Market Designs

Investment Rating - The report does not explicitly provide an investment rating for the power market industry Core Insights - The design of power markets is crucial for addressing economic, social, environmental, and engineering challenges to deliver sustainable and reliable electricity at the lowest cost to consumers [2] - There is significant heterogeneity in electricity market designs globally, with no universal blueprint, emphasizing the importance of country-specific contexts [11] - The report utilizes a unique Global Power Market Structures Database covering 230 economies from 1989 to 2024 to analyze the evolution of power market structures [12] Summary by Sections Section 1: Introduction - Electric power systems began in the late 19th century, initially dominated by private investors, transitioning to state-owned monopolies by the mid-20th century [8][9] - The performance of integrated monopolies has been mixed, leading to reforms aimed at introducing market mechanisms to enhance efficiency and attract private investment [9] Section 2: Power Market Structure Design Options - Between 1989 and 2024, 158 countries transitioned from vertically integrated utilities (VIUs) to models incorporating private sector engagement, particularly in generation [15] - The four overarching market structures identified are: (1) VIU, (2) single-buyer model (SBM), (3) competitive wholesale markets, and (4) competitive retail markets [19] 2.1 Vertically Integrated Utility (VIU) Model - In 1989, 215 economies operated under the VIU model, serving 92% of the global population; by 2023, this reduced to 72 economies covering 7% of the population [21] - 84% of VIUs are state-owned, with only 11 economies privatizing their VIUs while maintaining them as the sole provider [24] 2.2 Single Buyer Model (SBM) - The SBM is currently the most prevalent structure, utilized by 87 countries covering 29% of the global population [30] - Variations of the SBM exist, including models where the single buyer retains ownership of generation assets or is detached from generation functions [33] 2.3 Wholesale Competition - 69 countries have some form of wholesale competition, covering 63% of the global population [43] - The majority of these countries allow bilateral contracting between generators and large consumers, with organized spot markets complementing this structure [44] 2.4 Retail Competition - 66 economies allow some degree of retail competition, enabling end-users to choose their electricity supplier [61] - Full retail competition is primarily found in advanced European countries, with technology advancements facilitating further competition in developing nations [67]