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Integration of European Electricity Markets: Evidence from Spot Prices

Author

Listed:
  • Klaus Gugler
  • Adhurim Haxhimusa
  • Mario Liebensteiner

Abstract

This paper investigates the current state of market integration among European electricity day-ahead spot prices. In our empirical analysis we utilize a large sample of hourly spot prices of 25 European markets for the period 2010Jan01/01h-2015Jun30/24h and combine it with other relevant data such as hourly intercon-nector capacities and the existence of market coupling. Firstly, empirical results from cointegration analysis indicate that market integration increased from 2010 to 2012 but then declined until 2015, despite the introduction of market coupling in many markets. Secondly, we empirically assess error correction after price shocks and reach the conclusion that markets' strength of the error correction mechanism is rather modest. In general, our findings suggest that the integration among European electricity markets has a large potential for improvements from additional capacity investments and further promotion of market coupling.

Suggested Citation

  • Klaus Gugler & Adhurim Haxhimusa & Mario Liebensteiner, 2018. "Integration of European Electricity Markets: Evidence from Spot Prices," The Energy Journal, , vol. 39(2_suppl), pages 41-66, December.
    • Handle: RePEc:sae:enejou:v:39:y:2018:i:2_suppl:p:41-66
    DOI: 10.5547/01956574.39.SI2.kgug
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