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Integration and convergence in European electricity markets

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  • Carlo Andrea Bollino
  • Davide Ciferri
  • Paolo Polinori

Abstract

In this paper we investigate wholesale electricity prices integration process in the main European markets. After reforms introduced in the last decades in Europe, wholesale electricity prices are now determined in regulated markets. However, while market institutional frameworks show several similarities, there are still differences in fuel mix, generation units technologies, market structure. Using multivariate cointegration techniques we test integration dynamics within four European markets (Austria, Germany, France and Italy) for which we have collected a novel dataset of spot prices from 2004 to 2010. We provide evidence that German market constitutes a common stochastic trend driving the long-run behavior of other markets. Our results are robust to causality test, to Granger causality test, to oil price relevance test and provide additional evidence to assess the efficient market hypothesis in European electricity markets.

Suggested Citation

  • Carlo Andrea Bollino & Davide Ciferri & Paolo Polinori, 2013. "Integration and convergence in European electricity markets," Quaderni del Dipartimento di Economia, Finanza e Statistica 114/2013, Università di Perugia, Dipartimento Economia.
  • Handle: RePEc:pia:wpaper:114/2013
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    2. Florian Ziel & Rick Steinert & Sven Husmann, 2015. "Forecasting day ahead electricity spot prices: The impact of the EXAA to other European electricity markets," Papers 1501.00818, arXiv.org, revised Dec 2015.
    3. Melanie Houllier & Lilian M. De Menezes & Michael Tamvakis, 2014. "Time Varying Long Run Dynamics And Convergence In The Uk Energy Market," EcoMod2014 6970, EcoMod.
    4. Xiao, Binqing & Yang, Ye & Peng, Xuerong & Fang, Libing, 2019. "Measuring the connectedness of European electricity markets using the network topology of variance decompositions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    5. Oliver Wagner & Thomas Adisorn & Lena Tholen & Dagmar Kiyar, 2020. "Surviving the Energy Transition: Development of a Proposal for Evaluating Sustainable Business Models for Incumbents in Germany’s Electricity Market," Energies, MDPI, Open Access Journal, vol. 13(3), pages 1-17, February.
    6. María Del Carmen Ruiz-Abellón & Antonio Gabaldón & Antonio Guillamón, 2016. "Dependency-Aware Clustering of Time Series and Its Application on Energy Markets," Energies, MDPI, Open Access Journal, vol. 9(10), pages 1-22, October.
    7. Gianfreda, Angelica & Parisio, Lucia & Pelagatti, Matteo, 2016. "Revisiting long-run relations in power markets with high RES penetration," Energy Policy, Elsevier, vol. 94(C), pages 432-445.
    8. Massimiliano Caporin & Fulvio Fontini & Paolo Santucci De Magistris, 2017. "Price convergence within and between the Italian electricity day-ahead and dispatching services markets," "Marco Fanno" Working Papers 0215, Dipartimento di Scienze Economiche "Marco Fanno".
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    10. de Menezes, Lilian M. & Houllier, Melanie A. & Tamvakis, Michael, 2016. "Time-varying convergence in European electricity spot markets and their association with carbon and fuel prices," Energy Policy, Elsevier, vol. 88(C), pages 613-627.
    11. Yiyuan Chen & Yufeng Wang & Jianhua Ma & Qun Jin, 2019. "BRIM: An Accurate Electricity Spot Price Prediction Scheme-Based Bidirectional Recurrent Neural Network and Integrated Market," Energies, MDPI, Open Access Journal, vol. 12(12), pages 1-18, June.
    12. Ziel, Florian & Steinert, Rick & Husmann, Sven, 2015. "Forecasting day ahead electricity spot prices: The impact of the EXAA to other European electricity markets," Energy Economics, Elsevier, vol. 51(C), pages 430-444.
    13. Gatzert, Nadine & Vogl, Nikolai, 2016. "Evaluating investments in renewable energy under policy risks," Energy Policy, Elsevier, vol. 95(C), pages 238-252.
    14. de Menezes, Lilian M. & Houllier, Melanie A., 2015. "Germany's nuclear power plant closures and the integration of electricity markets in Europe," Energy Policy, Elsevier, vol. 85(C), pages 357-368.

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    More about this item

    Keywords

    European electricity markets; electricity spot prices; cointegration; structural MA representation;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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