Market Integration, Efficiency, and Interconnectors: The Irish Single Electricity Market

32 Pages Posted: 20 Mar 2012 Last revised: 8 May 2012

See all articles by Rabindra Nepal

Rabindra Nepal

affiliation not provided to SSRN

Tooraj Jamasb

Heriot-Watt University - Economics

Date Written: March 18, 2012

Abstract

Interconnections can be an effective way to increase competition and improve market integration in concentrated wholesale electricity markets with limited participants. This paper examines the potentials for interconnections and increasing market integration in the Irish Single Electricity Market (SEM). We use a time-varying Kalman filter technique to assess the degree of market integration between SEM and other large, mature and interconnected wholesale electricity markets in Europe including Great Britain (GB). The results indicate no market integration between SEM and other European markets except for Elspot and GB. We show that the current state of market integration between SEM and GB is just 17% indicating potentials to improve market integration via increased interconnections. The results indicate that liquidity of wholesale markets might be a crucial factor in the market integration process while our results remain inconclusive in determining whether increased trade of renewable can help in market integration.

Keywords: interconnection, wholesale markets, market integration, competition

JEL Classification: L94, C22, D02, G1

Suggested Citation

Nepal, Rabindra and Jamasb, Tooraj, Market Integration, Efficiency, and Interconnectors: The Irish Single Electricity Market (March 18, 2012). USAEE Working Paper Forthcoming. Available at SSRN: https://ssrn.com/abstract=2025628 or http://dx.doi.org/10.2139/ssrn.2025628

Rabindra Nepal (Contact Author)

affiliation not provided to SSRN ( email )

Tooraj Jamasb

Heriot-Watt University - Economics ( email )

United States

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