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The benefits of integrating European electricity markets

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Listed:
  • David Newbery

    () (EPRG, University of Cambridge and Control and Power Research Group, Imperial College London)

  • Goran Strbac

    (Control and Power Research Group, Imperial College London)

  • Ivan Viehoff

    (CEPA, London)

Abstract

The European Commission’s Target Electricity Model aims to integrate EU electricity markets. This paper estimates the potential benefit to the EU of coupling interconnectors to increase the efficiency of trading day-ahead, intra-day and sharing balancing services efficiently across borders. Further gains are possible by eliminating unscheduled flows and avoiding the curtailment of renewables with better market design. In the short run the gains could be as high as €3.3 billion/yr, more than 100% of the current gains from trade. About one-third of this total comes from day-ahead coupling and another third from shared balancing.
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Suggested Citation

  • David Newbery & Goran Strbac & Ivan Viehoff, 2015. "The benefits of integrating European electricity markets," Working Papers EPRG 1504, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
  • Handle: RePEc:enp:wpaper:eprg1504
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    References listed on IDEAS

    as
    1. Neuhoff, Karsten & Barquin, Julian & Boots, Maroeska G. & Ehrenmann, Andreas & Hobbs, Benjamin F. & Rijkers, Fieke A.M. & Vazquez, Miguel, 2005. "Network-constrained Cournot models of liberalized electricity markets: the devil is in the details," Energy Economics, Elsevier, vol. 27(3), pages 495-525, May.
    2. Meeus, Leonardo, 2011. "Implicit auctioning on the Kontek Cable: Third time lucky?," Energy Economics, Elsevier, vol. 33(3), pages 413-418, May.
    3. Böckers, Veit & Haucap, Justus & Heimeshoff, Ulrich, 2013. "Benefits of an integrated European electricity market," DICE Discussion Papers 109, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    5. David Newbery and Michael Grubb, 2015. "Security of Supply, the Role of Interconnectors and Option Values : insights from the GB Capacity Auction," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    6. Newbery, David M., 2016. "Towards a green energy economy? The EU Energy Union’s transition to a low-carbon zero subsidy electricity system – Lessons from the UK’s Electricity Market Reform," Applied Energy, Elsevier, vol. 179(C), pages 1321-1330.
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    More about this item

    Keywords

    electricity market coupling; interconnectors; balancing; benefits;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • F15 - International Economics - - Trade - - - Economic Integration
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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