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The extent of European power markets

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  • Böckers, Veit
  • Heimeshoff, Ulrich

Abstract

This paper analyzes the convergence process of Central-West European wholesale electricity markets from 2004 to the beginning of 2011. Jevon's law of price indifference is scrutinized using price correlation, parametric and nonparametric tests of price-differences and cointegration analysis. As a unique identifaction strategy national bank holidays are used as exogenous system shocks to trace the degree of market integration before the advent of the so-called market coupling of European power markets. In order to avoid overestimation of the degree of market integration, we specifically control for seasonal effects and common input factors. While the overall degree of integration between Germany and its neighbours has increased in the course of time, results suggest that only Austria and Germany already constitute a joint price area and that market coupling increases the convergence of markets at least between its participants. --

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Bibliographic Info

Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 50.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:50

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Related research

Keywords: Market Structure; Spatial Market Delineation; Time Series Econometrics; Energy Data; Electricity; Europe;

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References

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  1. Neumann, Anne & Siliverstovs, Boriss, 2005. "Convergence of European Spot Market Prices for Natural Gas? A Real-Time Analysis of Market Integration using the Kalman Filter," Dresden Discussion Paper Series in Economics 05/05, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. Mohammadi, Hassan, 2009. "Electricity prices and fuel costs: Long-run relations and short-run dynamics," Energy Economics, Elsevier, vol. 31(3), pages 503-509, May.
  3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  4. Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
  5. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
  6. Mjelde, James W. & Bessler, David A., 2009. "Market integration among electricity markets and their major fuel source markets," Energy Economics, Elsevier, vol. 31(3), pages 482-491, May.
  7. Froeb, L.M. & Werden, G.J., 1991. "Correlation, Causality, and all that Jazz: The Inherent Shortcomings of Price Tests for Antitrust Market Delineation," Papers 91-6, U.S. Department of Justice - Antitrust Division.
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Cited by:
  1. Böckers, Veit & Haucap, Justus & Heimeshoff, Ulrich, 2013. "Benefits of an integrated European electricity market," DICE Discussion Papers 109, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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