Home > By Topic > Electricity

Electricity

Energy security for the electricity sector requires adequate and timely investment in generation and network infrastructures. Markets are a powerful tool for achieving this goal efficiently. Yet, the ability of markets to deliver investment in power generation has been the subject of intense debate.

Competitive electricity markets can work satisfactorily if they are well designed and regulated. Investment decisions must be made by market players who will insist on knowing the costs and risks of their decisions. Cost reflective electricity prices have in general been able to attract sufficient and timely investment.

Most OECD electricity markets before reform were characterised by comfortable reserves of generating capacity and constant demand growth. When markets opened, this provided a cushion against supply security risks. As the cushion deflates, a real investment challenge has arisen out of demand growth and other factors.