Liberalization of the European Energy Market - Case Study Example

The paper "Liberalization of the EU Energy Market" is a perfect example of a case study on business. Economic liberalization refers to the process of creating an environment in which private entities can enter and compete in an open and deintegrated market, with little government influence or regulation. The case of liberalizing the European Union energy market has not been easy. The large and established energy utilities do not wish to have a free market across the 27 member nations of the EU. Deintegrating the energy market means that the companies will have to compete with other producers and marketers of energy, which means increased quality and reduced prices. The idea of competition is a key factor in the efforts of countries like Germany and France to impede the liberalization process. The governments of these major producers have also proved difficult to deal with due to their efforts to protect nationalism by preventing mergers and acquisitions. The lack of cooperation saw the European Commission file a lawsuit against Spain for preventing the acquisition of Endesa by Germany’s E.ON. 

Liberalization of the energy market will not only benefit the end-user (consumer) it will also help the energy companies to pit themselves against other producers and transmitters in the EU. Liberalizing the market will reduce the dependence of most EU countries on imported energy. Disintegration will allow small and upcoming energy producers to compete in the European market since it has been difficult for new entries to grow in their national countries. The competition will force the more vertically integrated energy companies to form mergers and acquire smaller companies in a bid to improve the quality of services offered. Creating one market instead of 27 markets will ensure that the production of fossil fuels focuses more on environmental protection, rather than profits. The consumer is bound to be the key beneficiary in this liberalization since a free market will encourage competition between the European Union companies. Competition means that the quality services will improve and the prices will reduce.
The disintegration of the large companies will increase liquidity in the market, which means that the smaller companies can enter freely without the fear of entry barriers by the EU governments. The liberalization of the larger companies will encourage fair competition, which brings about fair pricing and improved quality in the products and services offered. Deintegrating the established companies reduces the monopoly of such entities, which means that information can be shared freely across the borders. The transparency will encourage more activity from the smaller companies and any new companies that wish to enter and improve the service in the industry.
The energy market is quite wide; operations are divided into generation, transmission, and marketing. The wise thing to do is to split this process into the three stages that ensure the consumer gets quality energy products. Some companies should deal with production, others should deal with the transmission, while others should deal with marketing. Splitting the functions will allow the companies to specialize in a given stage, which may lead to the improvement of services offered. If a company specializes in one service, it tends to do its best to mitigate any obstacles that usually arise due to multitasking, which leads to the improvement of services offered. The European Commission should set up more regulators to fend off any lack of cooperation an anti-competitive behavior by the member countries who only seek to protect their self-interests. Regulating the EU governments will ensure that more people can freely invest in the energy market within and across their borders. Read More