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Integration and Convergence in European Electricity Markets

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  • Bollino, Carlo Andrea
  • Ciferri, Davide
  • Polinori, Paolo

Abstract

In this paper we investigate wholesale electricity prices integration process in the main European markets. After reforms introduced in the last decades in Europe, wholesale electricity prices are now determined in regulated markets. However, while market institutional frameworks show several similarities, there are still differences in fuel mix, generation units technologies, market structure. Using multivariate cointegration techniques we test integration dynamics within four European markets (Austria, Germany, France and Italy) for which we have collected a novel dataset of spot prices from 2004 to 2010. We provide evidence that German market constitutes a common stochastic trend driving the long-run behavior of other markets. Our results are robust to causality test, to Granger causality test, to oil price relevance test and provide additional evidence to assess the efficient market hypothesis in European electricity markets.

Suggested Citation

  • Bollino, Carlo Andrea & Ciferri, Davide & Polinori, Paolo, 2013. "Integration and Convergence in European Electricity Markets," MPRA Paper 44704, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:44704
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    3. Xiao, Binqing & Yang, Ye & Peng, Xuerong & Fang, Libing, 2019. "Measuring the connectedness of European electricity markets using the network topology of variance decompositions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
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    7. Massimiliano Caporin & Fulvio Fontini & Paolo Santucci De Magistris, 2017. "Price convergence within and between the Italian electricity day-ahead and dispatching services markets," "Marco Fanno" Working Papers 0215, Dipartimento di Scienze Economiche "Marco Fanno".
    8. de Menezes, Lilian M. & Houllier, Melanie A. & Tamvakis, Michael, 2016. "Time-varying convergence in European electricity spot markets and their association with carbon and fuel prices," Energy Policy, Elsevier, vol. 88(C), pages 613-627.
    9. Bjørndal, Endre & Bjørndal, Mette Helene & Coniglio, Stefano & Körner, Marc-Fabian & Leinauer, Christina & Weibelzahl, Martin, 2023. "Energy storage operation and electricity market design: On the market power of monopolistic storage operators," European Journal of Operational Research, Elsevier, vol. 307(2), pages 887-909.
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    16. Fianu, Emmanuel Senyo & Ahelegbey, Daniel Felix & Grossi, Luigi, 2022. "Modeling risk contagion in the Italian zonal electricity market," European Journal of Operational Research, Elsevier, vol. 298(2), pages 656-679.
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    18. Gianfreda, Angelica & Parisio, Lucia & Pelagatti, Matteo, 2016. "Revisiting long-run relations in power markets with high RES penetration," Energy Policy, Elsevier, vol. 94(C), pages 432-445.
    19. Cassetta, Ernesto & Nava, Consuelo R. & Zoia, Maria Grazia, 2022. "A three-step procedure to investigate the convergence of electricity and natural gas prices in the European Union," Energy Economics, Elsevier, vol. 105(C).
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    21. Koolen, Derck & Huisman, Ronald & Ketter, Wolfgang, 2022. "Decision strategies in sequential power markets with renewable energy," Energy Policy, Elsevier, vol. 167(C).
    22. Ziel, Florian & Steinert, Rick & Husmann, Sven, 2015. "Forecasting day ahead electricity spot prices: The impact of the EXAA to other European electricity markets," Energy Economics, Elsevier, vol. 51(C), pages 430-444.
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    More about this item

    Keywords

    European electricity markets; electricity spot prices; cointegration; structural MA representation.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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