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Wired together: Integration and efficiency in European electricity markets

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  • Karahan, Cenk C.
  • Odabaşı, Attila
  • Tiryaki, C. Sani

Abstract

This study investigates the efficiency dynamics of spot and futures electricity markets across a sample of European countries, while taking into account the impact of market couplings. The analysis employs three distinct efficiency measures, namely entropy, Hurst measure, and fractal dimension, to examine the markets of ten different countries. Specifically, entropy is used to gauge the randomness in market prices, while Hurst measure captures the long-term memory of prices, and fractal dimension measures the roughness and irregularity of price series. Our results indicate that these markets display analogous patterns of behavior, with improvements in efficiency observed following the introduction of structural and regulatory changes, such as market couplings. These findings underscore the potential advantages of market liberalization and energy market integration for both consumers and industry players, thus offering important insights for policy makers in this area.

Suggested Citation

  • Karahan, Cenk C. & Odabaşı, Attila & Tiryaki, C. Sani, 2024. "Wired together: Integration and efficiency in European electricity markets," Energy Economics, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:eneeco:v:133:y:2024:i:c:s0140988324002135
    DOI: 10.1016/j.eneco.2024.107505
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    More about this item

    Keywords

    European electricity markets; Efficiency; Market coupling; Entropy; Long-term memory; Fractal dimension;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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