The Competition in the Electricity Industry - Essay Example

This has left one wondering whether the electric industry is too complex for competition to work. Nonetheless, one can argue that the industry is not as complex as it may seem. Many of the monopolies are controllable since they are caused by the existing system of the governments of the competition in the electricity industry is not as complex as it seems. What has happened is players have always believed that one electricity firm can supply the entire demand at a considerably lower cost than multiple electric firms serving the appropriate market. From this basis, they conclude that electric transmission and distribution must always be to be regulated since in the absence of energy regulation, transmission, and effective ele, electricity distribution owners may not face enough competition in the industry to ensure prices are kept low for consumers and to attain economic efficiency in electricity transmitting and distributing.

This is, however, the case with many other natural monopolies in the industry. Natural monopolies exist where the existing supplier in the electricity industry, often also the first supplier in a market, has a significant cost advantage over other real or potential competitors; this has always tended to be the case making competition in the electricity industry ry seem complex. The same is the case in the same industry where fixed costs prevail, generating economies of scale that are huge about thereabouts is the case in water and electricity services.

This has led to complexity as these electricity firms take advantage of economies of scale and cause problems of cause crazy and inefficiency. As with all monopolies in the electricity market, monopolies that have gained that position on natural monopoly effects could be involved in behavior that abuses their market position, which always leads to calls from various consumers for government regulation. Encouraging competition in the electricity industry is not as complex but requires massive investment by private sector investment as the initial capital is many times massive thus discouraging players and this minimized competition.

This would especially start with deregulation that normally lacks monopoly, and these go a long way in encouraging new entrants in the electricity industry. This would encourage alternative energy sources and encourage competition due to the availability of substate minutes. This has been the key difference between markets of the electricity industry, and competitive market is product differentiation. Unlike in a perfectly competitive market where services are perfect substitutes for each other, the regulation in the electricity industry has minimized substitute possibilities.