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Price Signals in "Energy-only" Wholesale Electricity Markets: An Empirical Analysis of the Price Signal in France

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  • Philippe Vassilopoulos

Abstract

This paper analyzes the price signals of the French wholesale electricity market. We build a model of electricity prices that takes into account several key features of the French electricity market in order to assess the capacity of the price signal to guide investments. Wholesale prices should reflect the imbalances in the generation mix but the signal can be distorted if monopoly rents and/or Òmissing moneyÓ are present. We simulate over the 2003-2005 period theoretical perfectly competitive prices with the installed capacity and with the optimal mix to estimate the capacity imbalances and scarcity rents. We then compare the investment signal sent by observed electricity prices and the theoretical prices with the installed capacity. Although there are signs of market contestability for the mid-merit load, through market integration with the other continental markets, observed prices are too high for the baseload and too low for the peakload, as a result distorting the signal.

Suggested Citation

  • Philippe Vassilopoulos, 2010. "Price Signals in "Energy-only" Wholesale Electricity Markets: An Empirical Analysis of the Price Signal in France," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 83-112.
    • Handle: RePEc:aen:journl:2010v31-03-a05
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    Cited by:

    1. Carlos Pestana Barros & Guglielmo Maria Caporale & Luis A. Gil-Alana, 2012. "Long Memory in German Energy Price Indices," CESifo Working Paper Series 3935, CESifo.
    2. repec:dau:papers:123456789/13532 is not listed on IDEAS
    3. Marie Bessec & Julien Fouquau & Sophie Meritet, 2016. "Forecasting electricity spot prices using time-series models with a double temporal segmentation," Applied Economics, Taylor & Francis Journals, vol. 48(5), pages 361-378, January.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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