This report analyses the European electricity industry with emphasis on the state of liberalisation of the EU markets. The report analyses the situation regarding choice of supplier in each of the 15 EU member states. Finland, Germany, Sweden and the UK already have markets that, in principle, offer consumers a total choice of electricity supplier while Austria, Denmark, the Netherlands and Spain are expected to have fully opened their markets by 2003. All member countries have passed the minimum requirement of the EU Electricity Directive, i.e. 30 percent of the market open to competition by 2000. Although this minimum requirement has been achieved, there are still issues that have to be resolved.

In 2000, Germany was the largest consumer of electricity, with France, the UK and Italy also being significant players. By generating capacity, France was the largest generator, with Germany close behind. Italy and the UK each generated around half the amount of electricity of France and Germany.

Annual demand for electricity in the EU is expected to grow from 2,458 terawatt-hours in 2000, to 2,863 terawatt-hours by 2010. If the EU expanded to include 26 countries, by 2010 electricity consumption would be 3,437 terawatt-hours. There is considerable variation, country by country, in the predicted growth in consumption.

Regarding current issues, the EU is seeking ways in which it can bring all countries up to the same level of practical market openness. Before true competition can be achieved, it is important that access to transmission networks is arranged. Most countries have systems based on regulated access with published details but Germany has a negotiated access procedure, which is generally considered to be a barrier to trade. In order to provide competition in generation, transmission, distribution and non-electricity interests companies are now establishing these activities as separate entities, with commercial confidentially between them.

Regulation is an important issue and independent regulators are being set up, although there is variation between member states on progress here. Electricity is now being dealt with as part of a broader utility package, normally including gas but sometimes water, telecommunications and other services.

Consolidation continues, leading to the prospect of a few companies dominating the European electricity market.

Major European players include EVN — with its expanded multi-utility activities through participation in Energie Allianz, Electrabel — which has recently acquired EPON in the Netherlands and formed an alliance with CNR in France, Electricité de France — which continues to acquire companies throughout Europe, E.ON — the newly formed company arising from the merger of Veba and Viag in Germany that has recently bid for Powergen in the UK — and RWE of Germany — with its recent bid for a stake in the Spanish market.