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Cost Pass-Through in European Power Generation

Author

Listed:
  • Abrell, Jan
  • Zaklan, Aleksandar

Abstract

We analyze the extent to which marginal producers in four European day-ahead electricity markets pass through short-run marginal cost, and its components fuel and carbon cost, to wholesale electricity prices. Parametric estimates show that pass-through is complete in France and Germany, and incomplete in the Iberian and Dutch markets, mainly driven by fuel cost. For carbon cost, pass-through is more heterogeneous, with the evidence suggesting over-shifting in Germany and the Netherlands. Semi-parametric estimates show that pass-through increases with demand. In sum, we show that despite being located in interconnected power markets, electricity consumers receive different fuel and carbon price signals.

Suggested Citation

  • Abrell, Jan & Zaklan, Aleksandar, 2026. "Cost Pass-Through in European Power Generation," Working papers 2026/04, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2026/04
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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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