Liberalisation of the Energy Sector – Is It Reserved for Countries with Overcapacity?

Abstract: It is the year 2009! The question of whether or not to liberalise the energy industry would actually sound absurd in most fora. The usual query when raised is centred on the most effective form suited for a particular country. Liberalisation in its most basic form can be defined as the removal of monopoly rights and introduction of competition and choice. Experience has shown that efficiency in any system cannot be sustained in the absence of choice, hence the universal inclination towards it. In discussing liberalisation, countries are classified into two main groupings on the basis of their resource quotient or access to same; one group with overcapacity and the other with insufficient capacity. The emphasis of this paper is the electricity industry. This paper explores the possibility of countries with insufficient capacity having an opportunity to liberalise their energy markets and the options available to them. It argues that maximum benefits are derivable from the embrace of this world-wide trend and that liberalisation is a welcome option for economies at different levels of development. Finally, it concludes that liberalisation is not just about availability of capacity but should focus on efficiency capacity production and allocative efficiency.