From the State to the Market and Back. Policy Implications of Changing Energy Paradigms

Like almost no other sector, energy reflects changing paradigms. Following a statist approach in which energy services were subject to public provision and administered by state companies, the free market paradigm took over in the 1980s and 1990s, making energy subject to private provision instead. More recently, the world has witnessed a new era of interventionism. Assessing these different phases, this article advances three arguments. First, paradigms matter in energy as they provide for crucial policy prescriptions. Second, agendas have become more complex, adding sustainability and energy poverty to traditional supply security. Third, paradigms are inextricably linked to rule-setting power, putting the non-OECD world in charge of defining the next paradigm. With regards to the latter, it is argued that it will likely be one characterised by fragmentation, with elements of state and market coexisting.

Energy policy has shifted from a liberal market model to an interventionist one. Understanding the nature of this paradigm shift is essential for western policy makers and businesses to navigate effectively in this new energy environment.
Established OECD energy consumers are about to lose their rule-setting power in all three major energy arenas security, access and sustainability.
Energy priorities set in non-OECD, notably Asian, countries will determine policy pathways for rule takers. Incumbents need to embrace these shifts fully to formulate future policies effectively.
The market as dominant governance model in energy is increasingly contested. Businesses need to be prepared to adapt to fragmented environments between state dirigisme and market liberalism.