Market Formation

Markets need to be created for new, economically feasible alternatives which are considered desirable by society but which will not easily become successful unless a policy framework is established to promote them. International Energy Agency (IEA) talks about three perspectives through which we analyze market formation. These are:

1. Research, development, and deployment perspective which focuses on innovation and industrial strategies.
2. Market barriers perspective which is the economists perspective and focuses on decisions made by investors and users.
3. Market transformation perspective which looks into the whole chain from production to use.

IEA concludes that the three perspectives are complementary and they are all needed to help define good policies than can transform energy systems visions into practice through the discipline of markets (IEA 2003). In addition, the IEA Bioenergy Agreement has recognized the growing importance of international biotrade and the necessity to ensure it is sustainable, and for this reason established the Sustainable International Bioenergy Trade (IEA Task 40) to address these issues (please see http://www.bioenergytrade.org).

The context of new energy markets is conducive to the introduction of renewable energy options and the inclusion of users as important actors in the operation and development of energy systems. We have broadened the considerations on resource availability, technology choice, and reliability and are now asking questions about acceptability, cost return, and profitability. More attention to the users is necessary in a competitive market thus hopefully also resulting in better service provision. In addition, legislation and policy incentives that encourage developing bioenergy markets are important.