Energy deregulation has resulted in impressive 5 percent productivity growth rates in the U.S. and U.K. Germany has posted similar numbers recently. France's protected market, however, is relatively stagnant.
France Falling Behind
At the beginning of the 1990s, France was in a dominant position. Labor productivity figures (Exhibit 9) placed them 6 percent ahead of the U.S. and a commanding 30 percent ahead of the Germans. By the end of the decade, that lead had been wiped out. When adjusted for the capacity mix, France is now 20 percent behind both its counterparts. In choosing protectionism over deregulation, productivity for France's utilities has suffered.
Germany's Energetic Growth
Facing deregulation at the end of the '90s, Germany's labor productivity growth in energy sectors was lock-step with America's. In electricity generation, for example, competition increased and both countries posted impressive gains of more than 5 percent. Germany started later in the deregulation cycle than the U.S., so its strong growth is in a position to continue.
U.K. Pushing Ahead
In labor productivity, all leaders took a back seat to U.K. utilities. Britain charged into deregulation, introducing free choice of energy providers, unbundled generation and distribution, and regulated network access and prices. These regulatory changes forced companies to quickly improve efficiency to maintain profitability. Labor productivity in generation grew by seven percent; in distribution, it grew by 7.8 percent.
Challenges Ahead
Having lost a decade, France has the opportunity to make the most significant leaps ahead. Successes in Germany, the U.S., and the U.K. show that responsible deregulation could put France on the road to productivity leadership again.
Germany, meanwhile, also has some challenges to overcome to maintain its impressive track record. Network regulations especially need to create a level playing field for the different providers and put pressure on network operators to improve productivity. Responsible handling of these challenges could mean long-term sustainable productivity growth for Germany. Launch this chapter (PDF - 610 KB)
