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Interconnections and market integration in the Irish Single Electricity Market

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  • Nepal, Rabindra
  • Jamasb, Tooraj

Abstract

Interconnections can be an effective way to increase competition and improve market integration in concentrated wholesale electricity markets with limited number of participants. This paper examines the potential for interconnections and increasing market integration in the Irish Single Electricity Market (SEM). We use a time-varying Kalman filter technique to assess the degree of market integration between SEM and other large, mature and interconnected wholesale electricity markets in Europe including Great Britain (GB). The results indicate no market integration between SEM and other European markets except for Elspot and GB. We show that the current state of market integration between SEM and GB is just 17% indicating potential to improve market integration via increased interconnector capacity. The results indicate that liquidity of wholesale markets might be a crucial factor in the market integration process while our results remain inconclusive in determining whether increased trade of renewables can improve market integration.

Suggested Citation

  • Nepal, Rabindra & Jamasb, Tooraj, 2012. "Interconnections and market integration in the Irish Single Electricity Market," Energy Policy, Elsevier, vol. 51(C), pages 425-434.
    • Handle: RePEc:eee:enepol:v:51:y:2012:i:c:p:425-434
    DOI: 10.1016/j.enpol.2012.08.047
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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • G1 - Financial Economics - - General Financial Markets

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