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Measuring the impact of market coupling on the Italian electricity market

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  • Pellini, Elisabetta

Abstract

This paper evaluates the impact on the Italian electricity market of replacing the current explicit auction mechanism with market coupling. Maximising the use of the cross-border interconnection capacity, market coupling increases the level of market integration and facilitates the access to low-cost generation by consumers located in high-cost generation countries. Thus, it is expected that a high-priced area such as Italy could greatly benefit from the introduction of this mechanism. In this paper, the welfare benefits are estimated for 2012 under alternative market scenarios, employing the optimal dispatch model ELFO++. The results of the simulations suggest that the improvement in social surplus is likely to be significant, especially when market fundamentals are tight.

Suggested Citation

  • Pellini, Elisabetta, 2012. "Measuring the impact of market coupling on the Italian electricity market," Energy Policy, Elsevier, vol. 48(C), pages 322-333.
    • Handle: RePEc:eee:enepol:v:48:y:2012:i:c:p:322-333
    DOI: 10.1016/j.enpol.2012.05.029
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    References listed on IDEAS

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    1. Meyer, Roland & Gore, Olga, 2015. "Cross-border effects of capacity mechanisms: Do uncoordinated market design changes contradict the goals of the European market integration?," Energy Economics, Elsevier, vol. 51(C), pages 9-20.
    2. Fatras, Nicolas & Ma, Zheng & Duan, Hongbo & Jørgensen, Bo Nørregaard, 2022. "A systematic review of electricity market liberalisation and its alignment with industrial consumer participation: A comparison between the Nordics and China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 167(C).
    3. Valeria Di Cosmo & Sean Collins & Paul Deane, 2017. "The Effect of Increased Transmission and Storage in an Interconnected Europe: an Application to France and Ireland," Working Papers 2017.37, Fondazione Eni Enrico Mattei.
    4. Haxhimusa, Adhurim, 2018. "The Effects of German Wind and Solar Electricity on French Spot Price Volatility: An Empirical Investigation," Department of Economics Working Paper Series 258, WU Vienna University of Economics and Business.
    5. Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da & Cerqueira, Pedro A., 2015. "Evaluating the market splitting determinants: evidence from the Iberian spot electricity prices," Energy Policy, Elsevier, vol. 85(C), pages 218-234.
    6. Barbour, Edward & Wilson, I.A. Grant & Radcliffe, Jonathan & Ding, Yulong & Li, Yongliang, 2016. "A review of pumped hydro energy storage development in significant international electricity markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 421-432.
    7. Halužan, Marko & Verbič, Miroslav & Zorić, Jelena, 2022. "An integrated model for electricity market coupling simulations: Evidence from the European power market crossroad," Utilities Policy, Elsevier, vol. 79(C).
    8. Jan Horst Keppler, Sebastien Phan, and Yannick Le Pen, 2016. "The Impacts of Variable Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    9. Jan Horst Keppler & Sébastien Phan & Yannick Le Pen & Charlotte Boureau, 2017. "The Impact of Intermittent Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices," Working Papers hal-01599700, HAL.
    10. Luigi De Paoli & Elena Fumagalli, 2013. "Estimating welfare losses and gains in explicit auctions for power trade: an application to the Italian case," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2013(2), pages 153-181.
    11. E. Ruben van Beesten & Daan Hulshof, 2022. "Economic incentives for capacity reductions on interconnectors in the day-ahead market," Papers 2210.07129, arXiv.org.
    12. Nikolaos Koltsaklis & Athanasios Dagoumas, 2018. "Policy Implications of Power Exchanges on Operational Scheduling: Evaluating EUPHEMIA’s Market Products in Case of Greece," Energies, MDPI, vol. 11(10), pages 1-26, October.
    13. Kiesel, Rüdiger & Kusterman, Michael, 2016. "Structural models for coupled electricity markets," Journal of Commodity Markets, Elsevier, vol. 3(1), pages 16-38.
    14. Hellwig, Michael & Schober, Dominik & Woll, Oliver, 2020. "Measuring market integration and estimating policy impacts on the Swiss electricity market," Energy Economics, Elsevier, vol. 86(C).
    15. Michele Fiorelli & Dogan Keles & Francesco Montana & Giovanni Lorenzo Restifo & Eleonora Riva Sanseverino & Gaetano Zizzo, 2020. "Evaluation of the Administrative Phase-Out of Coal Power Plants on the Italian Electricity Market," Energies, MDPI, vol. 13(18), pages 1-24, September.
    16. Vika Koban, 2017. "The impact of market coupling on Hungarian and Romanian electricity markets: Evidence from the regime-switching model," Energy & Environment, , vol. 28(5-6), pages 621-638, September.
    17. Pfeifer, Antun & Krajačić, Goran & Haas, Reinhard & Duić, Neven, 2020. "Consequences of different strategic decisions of market coupled zones on the development of energy systems based on coal and hydropower," Energy, Elsevier, vol. 210(C).
    18. Pierre, Erwan & Schneider, Lorenz, 2024. "Intermittently coupled electricity markets," Energy Economics, Elsevier, vol. 130(C).
    19. Gore, Olga & Vanadzina, Evgenia & Viljainen, Satu, 2016. "Linking the energy-only market and the energy-plus-capacity market," Utilities Policy, Elsevier, vol. 38(C), pages 52-61.
    20. repec:dau:papers:123456789/14119 is not listed on IDEAS
    21. van Beesten, E. Ruben & Hulshof, Daan, 2023. "Economic incentives for capacity reductions on interconnectors in the day-ahead market," Applied Energy, Elsevier, vol. 341(C).
    22. Jemma J. Makrygiorgou & Christos-Spyridon Karavas & Christos Dikaiakos & Ioannis P. Moraitis, 2023. "The Electricity Market in Greece: Current Status, Identified Challenges, and Arranged Reforms," Sustainability, MDPI, vol. 15(4), pages 1-40, February.
    23. Filippos Ioannidis & Kyriaki Kosmidou & Kostas Andriosopoulos & Antigoni Everkiadi, 2021. "Assessment of the Target Model Implementation in the Wholesale Electricity Market of Greece," Energies, MDPI, vol. 14(19), pages 1-22, October.
    24. Füss, Roland & Mahringer, Steffen & Prokopczuk, Marcel, 2013. "Electricity Spot and Derivatives Pricing when Markets are Interconnected," Working Papers on Finance 1323, University of St. Gallen, School of Finance.

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