Unbundling – Strategic and Organisational Challenges for Power and Supply Companies

Abstract

One of the most important consequences of liberalising the electricity sector has been the vertical unbundling of activities. The creation of companies specialising in transmission and system operation activities has become crucial in liberalised markets. The transmission system operation (TSO) model, in which the same company carries out both transmission and system operation activities, is the one more generally used in Europe. Compared with the independent system operation (ISO) model, where system operation and transmission are developed by different companies, this model presents many advantages in terms of efficiency and security of supply based on the synergies coming from the integration of functions within the same company. The independence of TSOs is essential to preserve efficient functioning of the electricity market. Ownership unbundling of TSOs is the most effective way to achieve such independence.