Sustainable development and energy sector regulatory models

Abstract

The need for the inclusion of sustainable development issues in regulatory decision making highlights the importance to expand or modify traditional regulation models frequently used in some segments of the energy sector. These models have indeed been criticised on grounds of their emphasis on cost and financial efficiency. Aspects like the security of supply and climate change are major concerns of policy makers and must be properly assessed and integrated in the regulatory environment. The European Energy Regulators are already aware of the need to expand traditional regulation, beyond pure financial analysis. However, the sustainability concept is still strongly related to the environmental dimension alone and with the internalization of these externalities on the cost functions to be used. This paper presents a comparative study of different regulatory models in three European countries (UK, Portugal and Spain), focusing on the inclusion of sustainable development concerns on these models. This review indicates that regulatory authorities recognize the importance of the integration of the social and environmental dimension along with the economic one, but the formal design of such an integrated model is still emerging.