Market Liberalization and Innovation in the Energy Sector: The Case of Belgium and the Netherlands

Abstract

Electricity markets in Europe have gone through several rounds of liberalization reforms since the 1950s and 1960s. In recent decades these reforms have also been justified with non-optimal levels of innovation and research and development (R&D) in the energy sector. This article examines the effect electricity-market liberalization has on innovation in the sector and argues that market structure has an influence on the outcomes of these reforms when R&D and innovation diffusion are considered. This is usually not discussed during policy deliberations concerning electricity-market reforms. The case studies of Belgium and the Netherlands are used to exemplify the argument. The findings of the paper are relevant to policy discussions regarding innovation diffusion in the energy sector and the spread of renewable energy technologies. Furthermore, the new market context should be taken into account when designing energy-technology policies.