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Welfare and Competition Effects of Electricity Interconnection between Great Britain and Ireland

Author

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  • Laura Malaguzzi Valeri

    (Economic and Social Research Institute (ESRI))

Abstract

This study analyzes the effects of additional interconnection on welfare and competition in the Irish electricity market. I simulate the wholesale electricity markets of Great Britain and the island of Ireland for 2005. I find that in order for the two markets to be integrated in 2005, additional interconnection would have to be large. However, the amount of interconnection decreases for high costs of carbon, since this causes the markets to become more similar. Irish consumers obtain most of the welfare gains of interconnection. As the amount of interconnection increases, there are also positive effects on competition in Ireland, the less competitive of the two markets. Finally, it is unlikely that private investors will pay for the construction of the interconnector since they are unable to extract all its welfare benefits.

Suggested Citation

  • Laura Malaguzzi Valeri, 2008. "Welfare and Competition Effects of Electricity Interconnection between Great Britain and Ireland," Papers WP232, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp232
    as

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    File URL: http://www.esri.ie/pubs/WP232.pdf
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    References listed on IDEAS

    as
    1. FitzGerald, John & Keeney, Mary J. & McCarthy, Niamh & O'Malley, Eoin & Scott, Susan, 2005. "Aspects of Irish Energy Policy," Research Series, Economic and Social Research Institute (ESRI), number PRS57.
    2. Benjamin F. Hobbs & Fieke A.M. Rijkers & Maroeska G. Boots, 2005. "The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 69-98.
    3. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    4. Creti, Anna & Fabra, Natalia, 2007. "Supply security and short-run capacity markets for electricity," Energy Economics, Elsevier, vol. 29(2), pages 259-276, March.
    5. Neuhoff, Karsten & Newbery, David, 2005. "Evolution of electricity markets: Does sequencing matter?," Utilities Policy, Elsevier, vol. 13(2), pages 163-173, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    interconnection; electricity; Ireland;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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