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Price convergence and information efficiency in German natural gas markets

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Author Info

  • Growitsch, Christian

    ()
    (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

  • Stronzik, Marcus

    ()
    (Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH)

  • Nepal, Rabindra

    ()
    (Heriot-Watt University, Department of Economics)

Abstract

In 2007, Germany changed network access regulation in the natural gas sector and introduced a so-called entry-exit system. The re-regulation’s spot market effects remain to be examined. We use cointegration analysis and a state space model with time-varying coefficients to study the development of natural gas spot prices in the two major trading hubs in Germany and the interlinked Dutch spot market. To analyse information efficiency in more detail, the state space model is extended to an error correction model. Overall, our results suggest a reasonable degree of price convergence between the corresponding hubs. However, allowing for time-variant adjustment processes, the remaining price differentials are only partly explained by transportation costs, indicating capacity constraints. Nonetheless, market efficiency in terms of information processing has increased considerably among Germany and The Netherlands.

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Bibliographic Info

Paper provided by Energiewirtschaftliches Institut an der Universitaet zu Koeln in its series EWI Working Papers with number 2012-5.

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Length: 22 pages
Date of creation: 19 Mar 2012
Date of revision:
Handle: RePEc:ris:ewikln:2012_005

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Keywords: natural gas market; regulation; cointegration; price convergence; time-varying coefficient;

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References

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Citations

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Cited by:
  1. Kuper, Gerard & Mulder, Machiel, 2013. "Cross-border infrastructure constraints, regulatory measures and economic integration of the Dutch - German gas market," Research Report 13001-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  2. Rabindra Nepal & John Foster, 2013. "Testing for Market Integration in the Australian National Electricity Market," Energy Economics and Management Group Working Papers 11-2013, School of Economics, University of Queensland, Australia.
  3. Nick, Sebastian, 2013. "Price Formation and Intertemporal Arbitrage within a Low-Liquidity Framework: Empirical Evidence from European Natural Gas Markets," EWI Working Papers 2013-14, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  4. Nick, Sebastian & Thoenes, Stefan, 2013. "What Drives Natural Gas Prices? - A Structural VAR Approach," EWI Working Papers 2013-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  5. Mulder, M. & Kuper, G.H., 2013. "Cross-border constraints,institutional changes and integration of the Dutch – German gas market," Research Report 13004-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).

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