Defining European Wholesale Electricity Markets: An 'And/Or' Approach

Tinbergen Institute Discussion Paper TI 09-079/3

40 Pages Posted: 14 Sep 2009

See all articles by Elbert Dijkgraaf

Elbert Dijkgraaf

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus University Rotterdam, SEOR-ECRi

Maarten Janssen

University of Vienna - Faculty of Business, Economics, and Statistics

Date Written: September 14, 2009

Abstract

An important question in the dynamic European wholesale markets for electricity is whether to define the geographical market at the level of an individual member state or more broadly. We show that if we currently take the traditional approach by considering for each member state whether there is one single other country that provides a substitute for domestic production, the market in each separate member state has still to be considered a separate market. However, if we allow for the possibility that at different moments in time there is another country that provides a substitute for domestic production, then the conclusion should be that certain member states do not constitute a separate geographical market. This is in particular true for Belgium, but also for The Netherlands, France, and to some extent also for Germany and Austria. We call this alternative approach the "and/or" approach.

Keywords: Electricity, convergence, market definition, market coupling

JEL Classification: L94, L40

Suggested Citation

Dijkgraaf, Elbert and Janssen, Maarten C. W., Defining European Wholesale Electricity Markets: An 'And/Or' Approach (September 14, 2009). Tinbergen Institute Discussion Paper TI 09-079/3, Available at SSRN: https://ssrn.com/abstract=1472946 or http://dx.doi.org/10.2139/ssrn.1472946

Elbert Dijkgraaf (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus University Rotterdam, SEOR-ECRi ( email )

P.O. Box 1738
H 7-34
Rotterdam, 3000 DR
Netherlands
+31 10 4082590 (Phone)
+31 10 4089650 (Fax)

HOME PAGE: http://www.ecri.nl

Maarten C. W. Janssen

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

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