اندازه گیری یکپارچه سازی بین المللی برق: یک مطالعه مقایسه ای سیستم های انرژی تحت شورای شمال اروپا، MERCOSUR، و پیمان نفتا

Many regions of the world feel the pressure to interconnect electric power systems internationally. Regional integrations of the electricity sector have become part of free trade and common market initiatives, though the steps individual national jurisdictions take towards developing integrated systems vary. In this article, we review three regions concerned with common market initiatives and at different stages of integration processes that involve infrastructural, regulatory, and commercial decisions. First, we examine the North European countries in the Nordic Council, then countries in the Southern Cone of South America in MERCOSUR, and finally Mexico, the United States and Canada, linked under NAFTA. This comparative study highlights the potential, but also the many hurdles, that electricity sector integrations face. The study suggests a framework for measuring the level of electricity sector integration that could be applied to other regions.

In many regions of the world, neighboring countries feel the pressure to take steps towards interconnecting their electric power systems. Not all national and sub-national jurisdictions, however, follow the same steps towards, or achieve the same degree of, electricity sector integration. To what extent, then, have major regions, or major groups of countries, integrated their electricity sectors? One might expect that North America would lead the way in such a process, but that is not the case. Our review of the international literature on this topic, our analysis of recent electricity trade statistics, and our examination of market initiatives, show markedly different levels of progress in integration from region to region. By taking these supra-national contexts into consideration, we found that, unlike the Nordic countries that have almost fully integrated their electricity market and are more advanced than the other regions in infrastructure interconnection and regulatory compatibility, North and South American countries have only partially integrated these aspects of their electricity sectors. El-Agraa's (1989) conceptualizes regional trade and integration of markets as steps taken on a continuum towards full regional integration. We extend his insight to assess the steps that regions have taken to integrate key aspects (dimensions) of common electricity markets. In each region, by using a similar classificatory approach, we examine integrative developments such as infrastructure interconnection, progression towards regional regulations, and commercial integration as aspects of a common electricity market. On our integration continuum, each region can be assessed as having developed its integration process along three select dimensions, each sub-divided into four stages (Table 1). For instance, in determining a particular region's degree of physical infrastructure integration, one can categorize it as consisting of isolated national systems, as having cross-border transmission capabilities, as demonstrating coordinated effort in transmission investment (taking prices at generation and demand nodes into account), and as having developed a fully integrated regional systems operation. Such a fully integrated region would be managed with a common set of rules. Table 1. Integration continuum for regional electricity markets with location of each region along three dimensions Infrastructural integration Regulatory integration Commercial integration No regional integration Isolated national power systems Independent national regulation MERCOSUR National markets with local ownership ↓ Cross-border transmission capabilities MERCOSUR NAFTA Compatible regulation NAFTA Cross-border trade and ownership MERCOSUR Coordinated effort in transmission investment Nordic C. Coordination of regulatory agencies Nordic C. Regional spot market (unique price reference)a NAFTA Full regional integration Fully integrated regional system operation Regional regulatory agency Regional secondary/futures market Nordic C. a We recognize that long distances may result in different local prices at distinct transmission nodes. Table options Furthermore, on this continuum, each region can be assessed as to what degree its regulation of the electricity sector has become integrated. Regulation in a particular region can be seen as having reached the stages of independent national regulation, compatibility in regulation, regulatory coordination, and establishment of the same regulatory framework consisting of a regional regulatory agency. In addition, each region's status of commercial integration can be assessed according to four stages: a national market wherein local ownership prevails, a market that trades electricity cross-border and allows international ownership, a regional spot market with unique price reference, and a fully regionalized power market in which electricity futures can be commercially exchanged. Using international electricity sector documentation and data from the year 2000, we have discerned Northern Europe's, South America's, and North America's situation by making more precise each region's extent of infrastructure, commercial, and regulatory integration through employing several sets of indicators. We assess the degree of international infrastructure integration by employing two indicators: (1) cross-border transmission capabilities and (2) the ratio of each country's share of cross-border capabilities over transmission capacity ( Table 2, Table 6 and Table 10). To show the extent of commercial integration, we employ a second set of indicators: (3) electricity trade, or more specifically electricity import and export statistics, and (4) the share of each country's production capacity that can be exported or imported ( Table 5, Table 9 and Table 13). A third set of indicators we use to assess regulatory integration shows (5) the degree of coordination among national and sub-national regulatory bodies and (6) the main role such regulatory bodies play in regulating international electricity market integration (for example, in regulating exports and imports, approving transmission lines, insisting on international transmission line access reciprocity, and regulating wholesale and retail trading) ( Table 3, Table 7 and Table 11). In addition to identifying the stage each region has already reached, we highlight the obstacles each region faces in achieving full integration of its electricity market. This article is divided into three main sections, each containing the analysis of a different region. Section 2 will examine the degree of integration among the Nordic countries, Norway, Sweden, Finland, and Denmark. As will become evident, the Nordic countries’ path of electricity market integration has been largely influenced by the policies of the Nordic Council and the practices of the Organisation for Nordic Electricity Power Co-operation (NORDEL) and the strong Nordic tradition of cooperation both among countries and between public and private enterprises. Such Nordic integration principles guided the progressive regional electricity market integration that accomplished economic efficiency and implemented both innovative energy and environmental policies in the absence of international regulation. Section 3 will examine the degree of integration among the countries of Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay. We will show how significant transmission linkages and electricity trade, often involving imports and exports from major bi-national dam projects, have developed. Should MERCOSUR (Common Market of the South), which contributed to electricity market integration, again advance macroeconomic coordination initiatives, including both exchange rate and monetary policies, the region may move beyond these beginning stages towards more advanced forms of electricity market integration. Section 4 will examine how three North American countries—Canada, the United States, and Mexico—in the North American Free Trade Agreement (NAFTA) have taken initial steps towards trilateral trade in energy and electricity. Trilateral electricity sector integration, however, is at only the beginning stage. Our review of the development of transmission linkages, electricity trades, and national regulation reveals that electricity trade relations in this region remain bilateral Canada–United States and United States–Mexico.1

In this paper, we have studied the three dimensions of the integration continuum in three regions of the world. Table 14 and Table 15 summarize the main findings of our research, where important (but not exhaustive) integration indicators are provided for comparative purposes. Table 14. Infrastructure integrationa Transmission capability over production capacity (2000) Nordic countries MERCOSUR NAFTA Denmark 30.82% Argentina 36.66% Canada 17.13% Finland 9.83% Bolivia 0.00% US 2.51% Norway 20.35% Brazil 21.28% Mexico 2.42% Sweden 26.88% Chile 17.53% Paraguay 200.07% Uruguay 91.28% a This table uses information from Table 2, Table 6 and Table 10. Table options Table 15. Commercial integrationa Average energy exchange (2000) Nordic countries MERCOSUR NAFTA Imports 13.52% Imports 6.49% Imports 1.69% Exports 12.02% Exports 17.77% Exports 2.97% a This table uses information from Table 5, Table 9 and Table 13. Table options Infrastructure integration, measured here as the ratio of the total transmission capability over the total production capacity, is compared among regions in Table 14. It can easily be seen that Nordic countries are more harmoniously intertwined, with almost similar potentials of export/import for electricity. In MERCOSUR, the same ratio (indicator) varies extensively, with extremely high ratios for countries that are only exporting under long-term contracts (Paraguay, Uruguay), and zero value for isolated countries (Bolivia). North America is also unevenly integrated; only Canada has an important exchange capacity. Although the interpretation of these indicators should be made with the geography and size of the country in mind, it provides an explicit method for evaluating the level of infrastructure integration. It can, however, be seen that countries in these three regions are very reluctant to create common institutions, and even where integration is the most advanced, in Nordic countries, the common institution, Nordel, has no executive power. In the electricity sector (and even in the energy sector), no common regulatory institutions have ever been created to deal with regional issues, despite the open will, at least in Nordic counties and in North America, to better integrate in the long term the energy sector. Furthermore, both MERCOSUR and NAFTA member countries show striking differences in the way that their regulatory systems are set up and run. Finally, Table 15 provides a comparison of two possible indicators of actual commercial integration: the average percentages of imports (over consumption) and exports (over production) for the three regions. Again, consistent with the level of the infrastructure integration, Nordic counties are ahead of other regions in that aspect. It is also important to consider other aspects of commercial integration: the existence of a common market price reference, the cross-ownership of companies among countries in regions, and the dominance of state-owned enterprises in some. But again, as covered in more details in our sections on the different regions (see especially Table 4, Table 8 and Table 12 on market structure), the Nordic group stands alone in a very advanced position on these indicators. Although limited in scope, we have provided a clear framework for measuring electricity integration and its progress across regions. Beyond the analysis of integration indicators, we have discussed the serious obstacles electricity integration faces in North and South America, and how the Nordic countries have been more successful in this endeavor. The article suggests the presence of several key factors that might help to explain the differences in both the dynamics and outcomes of the integration processes. First, the general complementarity of generation fuel sources, peak-load consumption times, and the desire of certain nations or sub-national areas to export and/or import, seems to be the primary motivator behind integration. Second, physical infrastructure is a key to the shape of the integration process. The relatively small size and proximity of Nordic countries is an explanatory factor compared to the two American cases. Third, relative macroeconomic stability appears to be a necessary item for electricity integration. Both in the case of Mexico and the MERCOSUR, macroeconomic uncertainty inhibits investment flows. Conversely, it helps in the Nordic case to foster international cross-investment. Fourth, underlying norms, principles, and a history of cooperation seem to be crucial. This set the Nordic countries apart from other regions, where there is a much lower level of cooperation. In the case of North America in reference to the US and, to a lesser extent, South America in the case of Brazil, the asymmetries and strong differences among partners, as well as historical distrust, seem a formidable obstacle to creating a sense of cooperation. While discussed separately, our three dimensions of integration therefore clearly work together in practice. Commercial investment in, and management of, connecting physical infrastructure begs for common and reliable regulatory and investment framework, as well as agreed-upon technical standards. The regulatory and investment framework, meanwhile, must be shaped in accord with the physical layout of the integrating countries, their fuel resource endowment, and their current and projected fuel supply and demand conditions. Commercial integration, even on a limited scale, such as cross-ownership across borders, can create powerful forces for integration and coordination of regulatory policies, even if done in an informal sense. Finally, a willingness and mutual trust on the part of the national governments to create formal and informal institutions for cooperation is the necessary precursor to moving forward from basic international exchange to creating more deeply integrated markets over time. None of these key factors should be interpreted as saying that integration will not progress further. Both prospective improvement in generation and consumption mix, and the desire for international investors to trade are strong pro-integration forces in each of our cases. Rather, highlighting the dynamic factors, in relation to the three-dimensional integration framework introduced, provides a good basis by which to understand the different shapes and directions by which integration took place and could evolve within a region. The comparative work and the analytical structure used here will hopefully help the design of a sustainable integrated electricity sector, by offering a better understanding of its requirements and its path to success.