Electricity Market Coupling in Europe: Status Quo and Future Challenges

36 Pages Posted: 15 Oct 2014 Last revised: 13 Mar 2017

See all articles by Roland Füss

Roland Füss

University of St. Gallen - School of Finance

Steffen Mahringer

University of St.Gallen - Swiss Institute of Banking and Finance

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Date Written: March 10, 2017

Abstract

In electricity markets globally, market participants and policymakers increasingly focus on integrating adjacent, yet separate market areas via cross-border trade in electricity. Based on a discussion of the institutional framework for organizing cross-border trade, this paper analyzes how spot and futures prices for wholesale electricity are affected by different degrees of market integration. We first contrast the two main mechanisms to allocate transmission capacity between neighboring markets: explicit and implicit auctions. Subsequently, we study the impact of these allocation schemes on the empirical price dynamics of major electricity markets in Europe. Our empirical analysis thereby confirms that under market coupling, economically inefficient cross-border flows in the wrong direction can be avoided. From a policy point of view, however, we show that further market integration can be hindered by individual energy market regulation on a national level, which may be opposed to supra-national frameworks such as market coupling.

Keywords: Energy Market Coupling, Electricity Market Reforms, Explicit and Implicit Auction, Price Convergence

JEL Classification: Q4, Q41, D47

Suggested Citation

Füss, Roland and Mahringer, Steffen and Prokopczuk, Marcel, Electricity Market Coupling in Europe: Status Quo and Future Challenges (March 10, 2017). University of St.Gallen, School of Finance Research Paper No. 2015/12, Available at SSRN: https://ssrn.com/abstract=2509239 or http://dx.doi.org/10.2139/ssrn.2509239

Roland Füss

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Steffen Mahringer

University of St.Gallen - Swiss Institute of Banking and Finance ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Marcel Prokopczuk (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
229
Abstract Views
1,963
rank
146,191
PlumX Metrics