Integration and Convergence in European Electricity Markets

16 Pages Posted: 4 Mar 2013

See all articles by C. Andrea Bollino

C. Andrea Bollino

University of Perugia - Department of Economics, Finance and Statistics

Davide Ciferri

John Cabot University; Luiss Guido Carli University

Paolo Polinori

University of Perugia - Department of Economics

Date Written: January 7, 2013

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.

Keywords: European electricity markets, electricity spot prices, cointegration, structural MA representation

JEL Classification: C32, L16, Q41

Suggested Citation

Bollino, Carlo Andrea and Ciferri, Davide and Polinori, Paolo, Integration and Convergence in European Electricity Markets (January 7, 2013). Available at SSRN: https://ssrn.com/abstract=2227541 or http://dx.doi.org/10.2139/ssrn.2227541

Carlo Andrea Bollino

University of Perugia - Department of Economics, Finance and Statistics ( email )

Perugia, 06123
Italy

Davide Ciferri

John Cabot University ( email )

Via della Lungara 233
Rome, 00165
Italy

Luiss Guido Carli University

Roma

Paolo Polinori (Contact Author)

University of Perugia - Department of Economics ( email )

via A. Pascoli, 20
Perugia, Perugia 06123
Italy
+39 075 5855002 (Phone)
+39 075 5855299 (Fax)

HOME PAGE: http://https://www.unipg.it/personale/paolo.polinori

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