Competition can reduce electricity prices to consumers by reducing the cost of inputs to electricity generation and supply. Technology plays a pivotal role in realising this goal. Other IEA publications about electricity market reform analyse international developments and trends in regulation, costs, investment and organisation of competitive markets. This publication highlights the interaction of energy policy and energy technology. Competitive electricity markets are already transferring risk from consumers to electricity plant owners, who must now evaluate the cost-effectiveness of their technology choices more carefully than in the past.
Competition ultimately favours the most cost-effective technologies.
New government policies for technology support and environmental protection also play a role in evolving technological choices when competition is introduced. Existing power plants have a big advantage in markets newly opened to competition, simply because they are already in the market. They may have low debt loads and capital expenses. The financial risks for even a small power plant can be large. Therefore, owners of existing plants can make the best possible use of technologies that improve plant reliability, increase capacity, lengthen plant lifetime and increase operating flexibility.