Welfare and competition effects of electricity interconnection between Ireland and Great Britain
This study analyzes the effects of additional interconnection on welfare and competition in the Irish electricity market. I simulate the wholesale electricity markets of the island of Ireland and Great Britain for 2005. I find that in order for the two markets to be integrated in 2005, additional interconnection would have to be large. The amount of interconnection decreases for high costs of carbon, since this causes the markets to become more similar. This suggests that in the absence of strategic behavior of firms, most of the gains from trade derive not from differences in size between countries, but from technology differences and are strongly influenced by fuel and carbon costs. Social welfare increases with interconnection, although at a decreasing rate. As the amount of interconnection increases, there are also positive effects on competition in Ireland, the less competitive of the two markets. Finally, it is unlikely that private investors will pay for the optimal amount of interconnection since their returns are significantly smaller than the total social benefit of interconnection.
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- FitzGerald, John & Keeney, Mary J. & McCarthy, Niamh & O'Malley, Eoin & Scott, Susan, 2005. "Aspects of Irish Energy Policy," Research Series, Economic and Social Research Institute (ESRI), number PRS57.
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- Benjamin F. Hobbs & Fieke A.M. Rijkers & Maroeska G. Boots, 2005. "The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 69-98.
- Hobbs, B.F. & Rijkers, F.A.M., 2005. "The More Cooperation, the More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," Cambridge Working Papers in Economics 0509, Faculty of Economics, University of Cambridge.
- Creti, Anna & Fabra, Natalia, 2007. "Supply security and short-run capacity markets for electricity," Energy Economics, Elsevier, vol. 29(2), pages 259-276, March.
- Neuhoff, Karsten & Newbery, David, 2005. "Evolution of electricity markets: Does sequencing matter?," Utilities Policy, Elsevier, vol. 13(2), pages 163-173, June. Full references (including those not matched with items on IDEAS)
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