Deregulation

Deregulation or privatization has been a leading trend in global utility industries and utility services since the 1990s that have significantly opened participation and market entrance to a number of companies active in power generation, as power providers, water utility services, and natural gas utility services. Power market deregulation has created wholesale power markets in the U.S., Germany and other European and Asian countries since the 1990s, with diversification in transacted market services.

Independent power producers (IPPs) or merchant power plants are free to market their power generation as a commodity or service to utilities in deregulated markets, as opposed to exclusive power generation by power providers, or in other words only utilities. The effects of deregulation in the electrical power market include increased market competitiveness, assumed lower costs and prices for energy consumers, increased power plant construction, and a higher premium and prices for peak load or peak demand power generation. Gas turbine installations in the U.S. ballooned to nearly four times their usual annual rates during the 1990s and 2000s as merchant generators entered deregulated markets. Power market deregulation has also privileged industry investment in power generation over grid transmission and distribution infrastructure.

Deregulation in the water has been promoted as a means of using market forces to lower water prices and costs for the public, although it remains controversial due to its conventional status as a vital public good and guaranteed resource. Regionally and nationally re-regulation can proceed in a cyclical manner.