Mergers of Gas Market Areas and Competition Amongst Transmission System Operators: Evidence on Booking Behaviour in the German Markets

SOM Research Report 2018001-EEF

31 Pages Posted: 4 Mar 2018

See all articles by Jann T. Keller

Jann T. Keller

University of Groningen - Faculty of Economics and Business

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business

Machiel Mulder

Centre for Energy Economics Research, University of Groningen

Date Written: February 12, 2018

Abstract

Transmission networks are crucial for gas wholesale markets. In the past, the individual networks of transmission system operators (TSOs) determined market areas in the European Union, but driven by the prospect of higher liquidity in the wholesale market, welfare gains for society as well as completion of the internal energy market, market areas have been merged. Such market mergers, however, may also lead to competition amongst TSOs, as network users gain the possibility to book interchangeable capacity at different TSOs within one market area. A necessary condition for competition amongst TSOs is that network users book network capacity efficiently. This paper analyses whether this has been the case in the German market areas, which have experienced the highest market integration so far. We find that network users’ booking behaviour is fairly efficient. We also find that it is important to control for differences in country specific capacity types. In those cases where a more expensive alternative is preferred over a cheaper alternative, this inefficient behaviour can be largely attributed to differences in capacity types. We conclude that gas TSOs may not operate as pure natural monopolists anymore.

Keywords: Gas market, Regulation, Market mergers, Networks

JEL Classification: Q48, L51, L95, L98, K23

Suggested Citation

Keller, Jann T. and Kuper, Gerard H. and Mulder, Machiel, Mergers of Gas Market Areas and Competition Amongst Transmission System Operators: Evidence on Booking Behaviour in the German Markets (February 12, 2018). SOM Research Report 2018001-EEF, Available at SSRN: https://ssrn.com/abstract=3128275 or http://dx.doi.org/10.2139/ssrn.3128275

Jann T. Keller (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Machiel Mulder

Centre for Energy Economics Research, University of Groningen ( email )

Postbus 72
9700 AB Groningen
Netherlands

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