Electricity price evolution in the UK and Spain: A comparative analysis

Abstract

In the last two decades, the electricity industry has been reorganized to run on competitive lines in many countries. In the traditional cost of service structure of the electric power sector the costs were simply allocated to generation, transmission and distribution. After the restructuring, some activities were split up and new institutions were created, thus increasing the number of components and the overall complexity of the sector. The components assigned to each category and the volume of deferred cost payments differs among countries. The electricity systems of the UK and Spain have been operating in very different environments including political framework, energy resources, and economic structure, but liberalization should act as a converging force. To evaluate the overall results, in this paper we analyze the evolution of the real average final price of electricity, in PPP units, in the UK and Spain over the last three decades.