Thinking About the Future System Dynamics and the Process of Electricity Deregulation

The deregulation of energy markets in general, and the electricity and gas markets in particular, over the last two decades has created a large number of new challenges and opportunities for companies in this sector, as well as for companies who might diversify into the sector. Thirty years back, there were few who believed or even discussed the possibility of a large-scale deregulation of the electricity sector. Most of the issues discussed at that time concerned how to improve various aspects of the existing monopolistic structure of the industry, not how the whole sector could be transformed, as has happened in many countries over the last 10–20 years (Munasinghe and Meier 1993; Helm 2003). As deregulation spread across the world, companies in the sector have found that competitive complexity and intensity are increasing significantly as deregulated companies find themselves competing in newly created industries, with new rules, often with new owners, against unfamiliar competitors, and with rules and regulations that are often poorly understood by all the stakeholders. A wide range of competence-destroying innovations are making the links between the past and the future increasingly tenuous for electricity and gas companies, and a new wave of disruptive changes may be just around the corner as the industry is beginning to consolidate in some regions (Lomi and Larsen 1999). What kind of competencies should electricity companies build to prosper in an institutional and competitive environment in which the past seems to contain so little information about the future (Dyner and Larsen 2001)?