Informing energy market regulation and competition policy in the UK and Europe

In summary

Changes in energy markets impact all energy consumers, from multinationals to individual households, and regulatory bodies are in place to protect their interests: ensuring fairness, efficiency, and security of supply.

City, University of London’s research focuses on how wholesale electricity and gas markets function and the effects of the incorporation of new renewable technologies.

Led by ‪Professor Albert Banal-Estañol, the research has influenced government regulatory and policy decisions in the UK and across Europe, and informed investment decisions on new technologies in the private sector in Spain.

His expertise on competition policy and emissions-reducing technologies has also been applied in the landmark EU-wide truck-makers’ cartel prosecution and cited in litigation.

What did we explore and how?

Energy is an ‘essential service’ for homes and businesses across Europe. In Britain alone, households and businesses together spend around £55 billion on energy each year, according to Ofgem (The Office of Gas and Electricity Markets).

Professor Banal-Estañol’s research has developed techniques and concepts for understanding how energy markets operate and can be made more efficient.

Using theoretical, numerical and empirical methods, his research examines four overlapping areas relating to market regulation and competition including the effects of introducing renewable energies.

Professor Banal-Estañol has used the knowledge acquired through his research to inform decision-making as a member of Som Energia, a Spanish not-for-profit green energy consumer co-operative.

He joined the co-operative’s Governing Council in January 2018 and became its President in July 2020.

Since January 2019, Professor Banal-Estañol has also been acting as an expert witness in litigation in Spain, following the EU Commission’s landmark decision on the truck makers’ cartel.

This decision imposed the largest ever EU antitrust fine on a pan-European 15-year exchange of sensitive information, as well as delays to the introduction of new emission-reducing technologies for medium and heavy trucks.

In 2020, Som Energia had a project that cost around €5m and we asked members to contribute, money that would be paid back from the income we get from selling excess electricity to the grid. We set a deadline of 15 days, but we raised it all in one day. We want to extend this model but at the same time we’re not obsessed with growth. We just want to see renewables grow.

Benefits and influence of this research

The contribution of Professor Banal-Estañol’s research to the understanding of competition and regulation in the energy markets is demonstrated primarily through his advisory roles to business and government agencies.

His expertise in modelling and understanding the market, established through his academic publications, and his own efforts at outreach, mean that he is in high demand among policy makers and in legal and regulatory fields.

Professor Banal-Estañol’s research led directly to his appointments to the academic panels of the Competition and Markets Authority (CMA) in 2016 and Ofgem in 2017.

His appointment with the latter has seen him involved in key decisions and commissioned to write reports to adjust the new regulatory framework, RIIO (Revenue = Incentives + Innovation + Outputs). RIIO was first introduced in 2013 and determines the allowed gas and electricity transmission and distribution charges across England, Scotland and Wales.

Som Energia, with Banal-Estañol as President, are committed to driving change in the current energy model to achieve a 100% renewable model and to reducing energy poverty.

Professor Banal-Estañol involvement as an expert witness following the EU Commission’s decision on truck makers meant that, in July 2016, the EU Commission fined six manufacturers of medium and heavy-duty trucks (Man, Volvo/Renault, Daimler, Iveco, Daf) over €2.93 billion, with a subsequent fine of €880 million for Scania in September 2017.