Question

Why is third-party access to the power grid critical to liberalization of power sector?

Answer 1

Electric power system was characterized by a high degree of vertical integration and a low degree of competition. Today, the different stages in the supply chain are in a state of far-reaching unbundling, and competition has been established in the generation and retail sectors.The market liberalization process on the level began with the First Electricity Directive which was issued by the European Union (EU) and motivated by two main objectives-

To open the electric power sector for third parties and to prevent discriminatory behavior towards generation companies by grid operators.

To allow end consumers to choose their retailer in an effort to increase the affordability of electricity through more competition. Thus, the protected supply areas (regional monopolies) of the incumbent retail companies were abandoned in favor of retail competition.