Between natural monopoly and third party access - Swedish district heating market in transition

Summary, in English

The Swedish energy sector has gone through a number of major changes over the last 15 years. In 1996, the electricity market was deregulated, and at the same time the prerequisites for district heating were changed, as the heat was now supposed to be sold at market price rather than self-cost price. In this chapter we analyse the process of market transformation in the district heating sector following deregulation, by using case studies on the development in Stockholm and media reports on district heating. As a theoretical framework we use the theories of Large Technical Systems and Splintering Urbanism. We show that after deregulation, a major market transformation occurred, as many municipalities sold their energy companies, either to private actors or larger municipally-owned energy companies. Following this, the price of district heating increased rapidly, especially in Stockholm and Uppsala, where both municipalities sold their energy company. The price increases led to protests and debate in the media, where it became clear that there is a significant disparity in the interpretation of the market for district heating. The protesters argue that the energy companies are taking advantage of the natural monopoly that the district heating systems constitute. The energy companies on the other hand argue that they are acting in a heating market, where they are competing with other heating systems, such as heat pumps. However, the protesters argue that the lockin effects are such that once district heating is chosen, it is almost impossible to change systems because of the high investment costs. It is also clear that customers have not accepted the new market structure. Rather, many are arguing in favor of the "old system", with municipallyowned companies. The protests have also led to two government investigations regarding the possibility of an introduction of obligatory Third Party Access to the district heating systems, as a way to create competition within the market. Some of the energy companies oppose such an introduction, while others are in favor, as they see an opportunity to enter the market and compete for customers. However, there is no clear evidence that prices would actually decrease. Nevertheless, the processes over the last few years have shown how energy has gone from an invisible product that is simply "there" to something that is debated with a higher degree of public awareness.

• Author: Dick Magnusson; Jenny Palm
• Publishing year: 2011-12-01
• Language: English
• Pages: 1-33
• Publication/Series: Monopolies : Theory, Effectiveness and Regulation
• Document type: Book chapter
• Publisher: Nova Science Publishers, Inc.
• Topic: Energy Systems
• Status: Published
• ISBN/ISSN/Other: ISBN: 9781613243541