Electricity market integration, decarbonisation and security of supply: Dynamic volatility connectedness in the Irish and Great Britain markets

Abstract

This study investigates the volatility connectedness between the Irish and Great Britain electricity markets and how it is driven by changes in energy policy, institutional structures and political ideologies. We assess various aspects of this volatility connectedness including static (unconditional) vs dynamic (conditional), symmetric vs asymmetric characteristics between 2009 and 2018. We find that volatility connectedness is time varying and is significantly affected by important events, policy reforms or market redesigns such as Brexit, oil price slump, increasing share of renewables, and fluctuations in the exchange rates. Our asymmetric analysis shows that the magnitude of the good volatility connectedness is marginally larger than that of the bad volatility connectedness. Our result suggests that good volatility levels would be even higher once the Irish market adopts the carbon price floor. Therefore, supporting renewable generation by setting an appropriate carbon price in interconnected wholesale electricity markets will improve market integration.

The Electricity Market in Greece: Current Status, Identified Challenges, and Arranged Reforms

“…Using different scenarios, the study concluded that there are many benefits of using market coupling, such as the facilitating cross-border congestion management and maximizing the use of interconnection capacity between countries. In the same vein, other studies assess the implementation of Target Model in the British [13], Irish [14], Spanish [15], and Dutch electricity market [16]. In Ref.…”