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Trade and price variation in an integrated European power market

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  • Eirik Amundsen
  • Sigve Tjotta

Abstract

This paper examines the potential gains in terms of increased social surplus from integrating the power markets in Europe and assesses the scope for free seasonal and diurnal trade in a setting of Third Party Access (TPA). We construct an equilibrium model at the level of the wholesale markets, taking account of the existing power generating infrastructure (of varying flexibility) as well as the existing transmission network interconnecting the countries involved. The model indicates an overall gain from integrating the power markets. Electricity prices are substantially reduced for all regions involved, thus implying a significant redistribution of income from producers to consumers. Trade flourishes with regions establishing themselves as either pure exporters, pure importers or as intermediaries acting as transit countries.

Suggested Citation

  • Eirik Amundsen & Sigve Tjotta, 1997. "Trade and price variation in an integrated European power market," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 745-757.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:6:p:745-757
    DOI: 10.1080/000368497326679
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    References listed on IDEAS

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    1. Robert S. Pindyck, 1979. "The Structure of World Energy Demand," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661772, December.
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    1. Marta Ferreira Dias & Silvia F. Jorge, 2017. "Market power and integrated regional markets of electricity: a simulation of the MIBEL," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 6(2), pages 45-67, November.
    2. Golombek, Rolf & Brekke, Kjell Arne & Kittelsen, Sverre A.C., 2013. "Is electricity more important than natural gas? Partial liberalizations of the Western European energy markets," Economic Modelling, Elsevier, vol. 35(C), pages 99-111.
    3. Finn Roar Aune & Torstein Bye & Tor Arnt Johnsen, 2000. "Gas power generation in Norway: Good or bad for the climate? Revised version," Discussion Papers 286, Statistics Norway, Research Department.
    4. Amundsen, Eirik S. & Nesse, Arvid & Tjotta, Sigve, 1999. "Deregulation of the Nordic power market and environmental policy," Energy Economics, Elsevier, vol. 21(5), pages 417-434, October.
    5. Finn Roar Aune & Rolf Golombek & Sverre Kittelsen & Knut Einar Rosendahl, 2004. "Liberalizing the energy markets of Western Europe - a computable equilibrium model approach," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2137-2149.
    6. GOLOMBEK Rolf & KITTELSEN Sverre, 2010. "Long-run Effects of Liberalising the Energy Markets in Western Europe," EcoMod2003 330700063, EcoMod.
    7. Tennbakk, Berit, 2000. "Power trade and competition in Northern Europe," Energy Policy, Elsevier, vol. 28(12), pages 857-866, October.

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