|Herfindahl-Hirschman Index (HHI)|
|European Union Electricity Market Glossary|
The Herfindahl-Hirschman Index (HHI) measures the degree of concentration in a market.
In general, a high number of suppliers and low market concentration are seen as one of the indicators of a competitive market structure.
The HHI is calculated as the sum of the squares of the market shares of all firms in the market.
It ranges between 0, for an infinite number of small firms, and 10,000, for one firm with a 100% market share (CEER Draft Handbook of 18 July 2016 on Harmonised definitions of retail market metrics, CEER Public Consultation Paper, Ref: C16-SC-46-04, p. 9, 10, CEER Monitoring Report of 17 December 2018 on the Performance of European Retail Markets in 2017, Ref: C18-MRM-93-03, p. 9).
Market shares can be calculated on the basis of consumed volumes and number of customers or meter points.
Based on guidance from the European Commission (Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2004/C 31/03), an HHI above 2000 signifies a highly concentrated market with a small number of firms.
According to the CEER Monitoring Report of 17 December 2018, in electricity, eight CEER countries had in 2017 an HHI below 2,000, which indicates that these markets are less concentrated.
In 2016, that was true for only five countries.
For gas, the number of countries with a HHI below 2,000 moved from two to three from 2016 to 2017.
|Last Updated on Friday, 18 January 2019 21:42|