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The Renewables Influence on Market Splitting: the Iberian Spot Electricity Market

Author

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  • Nuno Carvalho Figueiredo

    (EFS Initiative, University of Coimbra, Sustainable Energy Systems – MIT-P, Coimbra, Portugal and INESC Coimbra, Portugal)

  • Patrícia Pereira da Silva

    (Faculty of Economics, University of Coimbra and INESC Coimbra, Portugal)

  • Pedro Cerqueira

    () (Faculty of Economics, University of Coimbra and GEMF, Portugal)

Abstract

This paper aims to assess the influence of wind power generation on the market splitting behaviour of the Iberian electricity spot markets. We use logit models to express the probability response for market splitting of day-ahead spot electricity prices together with explanatory variables like, wind speed, available transmission capacity and electricity demand. The results show that the probability of market splitting increases with the increase of wind power generation. The European interconnection capacity target of 10% of the peak demand of the smallest interconnected market has to be reconsidered, in order to keep electricity market integration a reality. As demonstrated, investment in interconnection capacity has to follow the investment and deployment of further wind power capacity, so coordination policies governing both interconnection development and renewable incentives should be designed.

Suggested Citation

  • Nuno Carvalho Figueiredo & Patrícia Pereira da Silva & Pedro Cerqueira, 2014. "The Renewables Influence on Market Splitting: the Iberian Spot Electricity Market," GEMF Working Papers 2014-14, GEMF, Faculty of Economics, University of Coimbra.
  • Handle: RePEc:gmf:wpaper:2014-14.
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    File URL: http://www.uc.pt/feuc/gemf/working_papers/pdf/2014/gemf_2014-14
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    References listed on IDEAS

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    More about this item

    Keywords

    Electricity Market Integration; Market Splitting; Renewable Energy.;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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