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Integration of European Electricity Markets: Evidence from Spot Prices

Klaus Gugler, Adhurim Haxhimusa, and Mario Liebensteiner

Year: 2018
Volume: Volume 39
Number: Special Issue 2
DOI: 10.5547/01956574.39.SI2.kgug
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Abstract:
This paper investigates the current state of market integration among European electricity day-ahead spot prices. In our empirical analysis we utilize a large sample of hourly spot prices of 25 European markets for the period 2010Jan01/01h-2015Jun30/24h and combine it with other relevant data such as hourly interconnector capacities and the existence of market coupling. Firstly, empirical results from cointegration analysis indicate that market integration increased from 2010 to 2012 but then declined until 2015, despite the introduction of market coupling in many markets. Secondly, we empirically assess error correction after price shocks and reach the conclusion that markets' strength of the error correction mechanism is rather modest. In general, our findings suggest that the integration among European electricity markets has a large potential for improvements from additional capacity investments and further promotion of market coupling.



Unbundling, Regulation, and Pricing: Evidence from Electricity Distribution

Sven Heim, Bastian Krieger, and Mario Liebensteiner

Year: 2020
Volume: Volume 41
Number: Special Issue
DOI: 10.5547/01956574.41.SI1.shei
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Abstract:
Unbundling of vertically integrated utilities has become an integral element in the regulation of network industries and has been implemented in many jurisdictions. The idea of separating the network, as the natural monopoly, from downstream retailing, which may be exposed to competition, is still subject to contentious debate, as there is much empirical evidence that unbundling eliminates economies of vertical integration, though evidence on overall price effects is still lacking. In this paper, we study the effect of legal unbundling on grid charges in the German electricity distribution industry. Using panel data on German distribution system operators (DSOs), we exploit the variation in the timing of the implementation of legal unbundling and the fact that not all DSOs had to implement unbundling measures. We are also able to identify heterogeneous effects of legal unbundling for different types of price regulation because we observe a switch in the price regulation regime from rate-of-return regulation to incentive regulation during our observation period. Our findings suggest that legal unbundling of the network stage significantly decreases grid charges in the range of 5% to 9%, depending on the type of price regulation in place.





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