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Electricity Traffic over the Barriers of Networks: The Case of Germany and The Netherlands

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  • Hans Andeweg, André Dorsman, Kees van Montfort

    () (VU University Amsterdam)

Abstract

Since the electricity market was liberalized at the end of the last century, the authorities no longer fix prices, and there is now a variable price determined by the market. Every system has its own price-forming process. However, these systems are not completely isolated. It is possible to have a restricted measure of electricity traffic between the systems. This article describes a value-creating trade strategy on the basis of the prices of electricity in The Netherlands and Germany, making use of the restricted electricity traffic between the two countries, providing empirical evidence on exploitable pricing inefficiencies in the electricity markets and potential trading strategies based thereupon. This research has not been conducted before and will provide a better understanding of the interaction between separate electricity markets.

Suggested Citation

  • Hans Andeweg, André Dorsman, Kees van Montfort, 2009. "Electricity Traffic over the Barriers of Networks: The Case of Germany and The Netherlands," Frontiers in Finance and Economics, SKEMA Business School, vol. 6(2), pages 120-139, October.
  • Handle: RePEc:ffe:journl:v:6:y:2009:i:2:p:120-139
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    Keywords

    Efficient markets; Electricity markets; Electricity traffic; Trade strategy;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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