Integration and Convergence in European Electricity Markets

Bollino, Carlo Andrea and Ciferri, Davide and Polinori, Paolo (2013): Integration and Convergence in European Electricity Markets.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: European electricity markets, electricity spot prices, cointegration, structural MA representation.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices

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