IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v39y2018i2_supplp41-66.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.39.SI2.kgug
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.39.SI2.kgug?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Grossi, Luigi & Heim, Sven & Waterson, Michael, 2014. "A vision of the European energy future? The impact of the German response to the Fukushima earthquake," The Warwick Economics Research Paper Series (TWERPS) 1047, University of Warwick, Department of Economics.
    2. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    3. Pier Giorgio Ardeni, 1989. "Does the Law of One Price Really Hold for Commodity Prices?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 661-669.
    4. Böckers, Veit & Haucap, Justus & Heimeshoff, Ulrich, 2013. "Benefits of an integrated European electricity market," DICE Discussion Papers 109, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. David F. Hendry & Katarina Juselius, 2001. "Explaining Cointegration Analysis: Part II," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-120.
    6. Lucas W. Davis & Lutz Kilian, 2011. "The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas," Journal of Political Economy, University of Chicago Press, vol. 119(2), pages 212-241.
    7. Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, vol. 30(4), pages 1659-1671, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lyu, Chenyan & Do, Hung Xuan & Nepal, Rabindra & Jamasb, Tooraj, 2024. "Volatility spillovers and carbon price in the Nordic wholesale electricity markets," Energy Economics, Elsevier, vol. 134(C).
    2. Yang, Yifan & Guo, Ju’e & Li, Yi & Zhou, Jiandong, 2024. "Forecasting day-ahead electricity prices with spatial dependence," International Journal of Forecasting, Elsevier, vol. 40(3), pages 1255-1270.
    3. Gianfreda, Angelica & Scandolo, Giacomo & Bunn, Derek, 2024. "The connectedness features of German electricity futures over short and long maturities," Finance Research Letters, Elsevier, vol. 70(C).
    4. Kota Sugimoto, 2024. "Competitive effects of implicit auction on interconnectors: evidence from Japan," Journal of Regulatory Economics, Springer, vol. 66(1), pages 95-134, August.
    5. Gökgöz, Fazıl & Yücel, Öykü, 2024. "Merit-order of dispatchable and variable renewable energy sources in Turkey's day-ahead electricity market," Utilities Policy, Elsevier, vol. 88(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klaus Gugler & Adhurim Haxhimusa & Mario Liebensteiner, 2016. "Integration and Efficiency of European Electricity Markets: Evidence from Spot Prices," Department of Economics Working Papers wuwp226, Vienna University of Economics and Business, Department of Economics.
    2. Rui Menezes & Andreia Dioniso, 2011. "Globalization and long-run co-movements in the stock market for the G7: an application of VECM under structural breaks," Papers 1101.4093, arXiv.org.
    3. Gugler, Klaus & Haxhimusa, Adhurim, 2019. "Market integration and technology mix: Evidence from the German and French electricity markets," Energy Policy, Elsevier, vol. 126(C), pages 30-46.
    4. Simon Price, 2004. "UK investment and the return to equity: Q redux," Money Macro and Finance (MMF) Research Group Conference 2004 87, Money Macro and Finance Research Group.
    5. Nnaemeka Vincent Emodi & Taha Chaiechi & ABM Rabiul Alam Beg, 2018. "The impact of climate change on electricity demand in Australia," Energy & Environment, , vol. 29(7), pages 1263-1297, November.
    6. Ozcan, Burcu & Ozturk, Ilhan, 2016. "A new approach to energy consumption per capita stationarity: Evidence from OECD countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 332-344.
    7. David I. Stern, 2011. "From Correlation to Granger Causality," Crawford School Research Papers 1113, Crawford School of Public Policy, The Australian National University.
    8. Maslyuk, Svetlana & Smyth, Russell, 2008. "Unit root properties of crude oil spot and futures prices," Energy Policy, Elsevier, vol. 36(7), pages 2591-2600, July.
    9. Yeboah Asuamah, Samuel, 2016. "Are output fluctuations transitory or permanent in Ghana?," MPRA Paper 70270, University Library of Munich, Germany.
    10. Borozan, Djula, 2017. "Testing for convergence in electricity consumption across Croatian regions at the consumer's sectoral level," Energy Policy, Elsevier, vol. 102(C), pages 145-153.
    11. Derek W. Bunn & Carlo Fezzi, 2007. "Interaction of European Carbon Trading and Energy Prices," Working Papers 2007.63, Fondazione Eni Enrico Mattei.
    12. Filip, Ondrej & Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2019. "Food versus fuel: An updated and expanded evidence," Energy Economics, Elsevier, vol. 82(C), pages 152-166.
    13. Peia, Oana & Roszbach, Kasper, 2015. "Finance and growth: Time series evidence on causality," Journal of Financial Stability, Elsevier, vol. 19(C), pages 105-118.
    14. repec:dau:papers:123456789/6801 is not listed on IDEAS
    15. repec:zbw:iamodp:310088 is not listed on IDEAS
    16. Nepal, R. & Jamasb, T., 2011. "Market Integration, Efficiency, and Interconnectors: The Irish Single Electricity Market," Cambridge Working Papers in Economics 1144, Faculty of Economics, University of Cambridge.
    17. Ferkingstad, Egil & Løland, Anders & Wilhelmsen, Mathilde, 2011. "Causal modeling and inference for electricity markets," Energy Economics, Elsevier, vol. 33(3), pages 404-412, May.
    18. Wang, Dabin & Tomek, William G., 2004. "Commodity Prices And Unit Root Tests," 2004 Annual meeting, August 1-4, Denver, CO 20141, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Keles, Dogan & Dehler-Holland, Joris & Densing, Martin & Panos, Evangelos & Hack, Felix, 2020. "Cross-border effects in interconnected electricity markets - an analysis of the Swiss electricity prices," Energy Economics, Elsevier, vol. 90(C).
    20. Alexander Zerrahn & Daniel Huppmann, 2014. "Network Expansion to Mitigate Market Power: How Increased Integration Fosters Welfare," Discussion Papers of DIW Berlin 1380, DIW Berlin, German Institute for Economic Research.
    21. Lin, Boqiang & Xu, Lin, 2015. "Energy conservation of electrolytic aluminum industry in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 676-686.
    22. Davide Ciferri & Maria Chiara D’Errico & Paolo Polinori, 2020. "Integration and convergence in European electricity markets," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(2), pages 463-492, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:39:y:2018:i:2_suppl:p:41-66. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.