This is an Open Access article. You will receive access to the full text.

Integration of European Electricity Markets: Evidence from Spot Prices

Open Access Article

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.

Download Executive Summary Download PDF

Energy Specializations: Electricity – Markets and Prices ; Energy Investment and Finance – Trading Strategies and Financial Instruments; Energy and the Economy – Energy Shocks and Business Cycles

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q42: Alternative Energy Sources, D47: Market Design, D61: Allocative Efficiency; Cost-Benefit Analysis

Keywords: Market Integration; Spot Price; Convergence; Internal Market, Electricity

DOI: 10.5547/01956574.39.SI2.kgug

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 39, Special Issue 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2021 International Association for Energy Economics | Privacy Policy | Return Policy