The Single European Electricity Market: A Long Road to Convergence

Abstract

In the context of a first Working Paper the authors argued that electricity has a number of characteristics that set it apart from other commodities. It was demonstrated that some of these characteristics might complicate the deregulation process. This paper analyses the ongoing deregulation process in the European electricity sector and attempts to establish whether these difficulties can more readily be solved at European level. It would appear that some problems, e.g. economies of scale in electricity generation, have less of an impact at European level than within smaller national markets. However, a number of difficulties have to be overcome before a unified European electricity market can become a reality. These include the limited interconnection capacities between Member States. The European Commission has taken steps to improve the situation, for example by offering financial support for investments and promoting the development of regional markets as an interim measure ultimately leading to a fully integrated market. Apart from the difficulties related to electricity generation and transmission there are also exogenous factors that influence the ongoing deregulation process, e.g. the implementation of the Kyoto protocol and the dramatic increases in primary fuel prices. This paper argues that a consistent, stable and uniform European regulatory framework must be put in place if the impact of these difficulties is to be minimised. JEL Classification: L94.

Assessing the determinants of household electricity prices in the EU: a system-GMM panel data approach

“…In this context, a more recent study by Cruciani [8] is to mention, aligned with results from Coppens and Vivet [6]. Cruciani [8] argument starts with the observation that electricity prices for domestic and industrial users have increased significantly since 1998, the year that marks the opening of the EU electricity markets.…”

“…6 Table 2 summarizes the results for a number of different specifications. 7 First, following Roodman [35], it should be clarified that all the specifications have less instruments than cross-groups to avoid over specification that may bias the statistics of the instrument validity tests.…”

“…The p-values are reported between parentheses. 6 However, we should note that the gas price is country invariant and therefore we cannot include this variable simultaneously with the time dummies, so we exclude the time dummies whenever the l. GASp t is present in the regression. 7 For robustness we estimated, also, all the different models including a dummy to control for the change in the methodology of measuring the electricity price (which was always not significant) and without the gas price and including the time dummies as they make the assumption of no correlation across individuals in the idiosyncratic disturbances more likely to hold -see, Roodman [35].…”

Weather and market specificities in the regional transmission of renewable energy price effects

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Evaluating the market splitting determinants: evidence from the Iberian spot electricity prices

“…On the other hand, flow-based costs are most commonly used due to their dependence on the capacity and extent used by each generator of the transmission lines. Explicit auctioning, where interconnector capacity is sold to the highest bidder or implicit auctioning, which integrates electricity and transmission markets and also called Market Splitting/Price Coupling, are both used across Europe (Coppens and Vivet, 2006).…”