TITLE:
The Model of the Five Competitive Forces on Portuguese Electricity Market
AUTHORS:
Ricardo Raimundo, Nuno Domingues
KEYWORDS:
Liberalization, Privatization, Electricity Market, Porter, Portugal, Energy Market Competition
JOURNAL NAME:
Modern Economy,
Vol.12 No.1,
January
29,
2021
ABSTRACT: In Portugal, the energy sector apparently shows lack
of efficiency as the amount of energy used to generate a unit of GDP, also
called energy intensity of the economy (TPES/GDP), an indicator of energy
efficiency, which decreased in Portugal in a couple of decades less than in the
EU 27 overall. The TPES/GDP indicator stills high in most Portuguese economic
sectors in comparison with the EU27 average. To determine the reasons of such
lack of energetic efficiency this work aims to analyze the Portuguese
electricity market based on the model of the five competitive forces of Michael
Porter that was chosen due to the idiosyncrasies of electricity sector, of
strategies highly anchored on its external competitive setting and of little
innovation around a non-differentiated electricity product of extended life
cycle. Firstly, the theoretical aspects of the model are explained; secondly,
it is made a critical review, including the reasons for choosing it; thirdly,
the model is applied to the electricity market in Portugal and finally the main
findings are revealed. The main methodology used is literature review of
secondary sources and data. Authors mainly relied on sources of high-quality
material. The input data has been collected from national institutes and from
the information offered by the main players on their web sites. These sources
are certified, and the input information is supported by their credibility and
by the supervision departments. Portugal, due to the Country dimension and the
barriers, the players are still few, and the electricity market is
concentrated. The competition is high among 3 - 4 major
players; the barriers are high; the electricity of traditional national
suppliers is high although mitigated by the entry of other European Union
distributors; the bargaining power of consumers is low and the substitutes are
inexistent. Moreover, the equipment in consumption is aggregated to
electricity, which is not easy to change. As electricity cannot be
differentiated, energy distribution companies need to set strategies to engage
consumers. The present paper reflects and analyses on these assumptions and
concludes that to augment energetic efficiency, companies in energy markets as
Portugal must prioritize diversity, complementary services and non-related
products. Also, the low degree of competition has no conditions to be surpassed
in the near years due to the inefficient features of the energy market and
subsequent barriers.