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Measuring inefficiency in international electricity trading

Author

Listed:
  • Montoya, L.G.
  • Guo, B.
  • Newbery, D.
  • Dodds, P.E.
  • Lipman, G.
  • Castagneto Gissey, G.

Abstract

Interconnectors reduce the cost of supplying electricity if they are operated efficiently. We show that established metrics which are used to monitor electricity trading inefficiency are inaccurate for several typical trading conditions. We propose two new metrics—the Unweighted and Price-Weighted Inefficient Interconnector Utilisation indices—to address these deficiencies. These metrics are substantially more accurate than existing ones and perform equally well whether or not interconnected markets have coupled trading. Our analyses show a substantial decrease in inefficient trading between Great Britain (GB) and both France and the Netherlands after the European Union's market coupling regulations were introduced in 2014.

Suggested Citation

  • Montoya, L.G. & Guo, B. & Newbery, D. & Dodds, P.E. & Lipman, G. & Castagneto Gissey, G., 2020. "Measuring inefficiency in international electricity trading," Energy Policy, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:enepol:v:143:y:2020:i:c:s0301421520302664
    DOI: 10.1016/j.enpol.2020.111521
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    Cited by:

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    3. Hu, Bo & Zhou, P., 2022. "Can the renewable power consumption guarantee mechanism help activate China's power trading market?," Energy, Elsevier, vol. 253(C).

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    More about this item

    Keywords

    Electricity trading efficiency; Cross-border allocation; Interconnector; Market coupling; Metrics;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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