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Netting of Capacity in Interconnector Auctions

Felix Hoffler and Tobias Wittmann

Year: 2007
Volume: Volume 28
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No1-6
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Abstract:
Scarce interconnector capacities are a severe obstacle to transregional competition and a unified market for electricity in the European Union. However, physically the interconnectors are rarely used up to capacity. This is due to the fact that the current allocation schemes make only limited use of the fact that currents in opposing directions cancel out. We propose a �netting� auction mechanism which makes use of this and in which even small transmission capacities can generate large competitive pressure in adjacent markets. Netting increases the usage of capacity and reduces the auctioneer�s incentive to withhold capacity from the auction.



How Competitive is Cross-border Trade of Electricity? Theory and Evidence from European Electricity Markets

Georg Gebhardt and Felix Hoffler

Year: 2013
Volume: Volume 34
Number: Number 1
DOI: 10.5547/01956574.34.1.6
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Abstract:
Integrating national markets is a major policy target in the European energy market. Yet, wholesale prices for electricity still differ significantly. Whether these price differences are caused only by limited interconnector capacities or also by lack of cross-border competition is an open question. To address this question, we develop a new approach to determine to which extent price differences stem from limited participation in cross-border trade. We derive a theoretical integration benchmark, using Grossman's (1976) notion of a rational expectations equilibrium. We compare the benchmark to data from European electricity markets. The data reject the integration hypothesis and indicate that well informed traders do not engage in cross-border trade.





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