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Elecxit: The Cost of Bilaterally Uncoupling British-EU Electricity Trade

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  • Geske, J.
  • Green, R.
  • Staffell, I.

Abstract

The UK’s withdrawal from the European Union could mean that it leaves the EU Single Market for electricity (Elecxit). This paper develops methods to study the longer-term consequences of this electricity market disintegration, and in particular the end of market coupling. Before European electricity markets were coupled, different market closing times forced traders to commit to cross-border trading volumes based on anticipated market prices. Interconnector capacity was often under-used, and power sometimes flowed from high- to low-price areas. A model of these market frictions is developed, empirically verified on 2009 data (before market coupling) and applied to estimate the costs of market uncoupling in 2030. A less efficient market and the abandonment of some planned interconnectors would raise generation costs by €560m a year (1.5%) compared to remaining in the Single Electricity Market. Sixty percent (€300m) of these welfare losses occur in Great Britain.

Suggested Citation

  • Geske, J. & Green, R. & Staffell, I., 2019. "Elecxit: The Cost of Bilaterally Uncoupling British-EU Electricity Trade," Cambridge Working Papers in Economics 1947, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1947
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    Cited by:

    1. Michael G Pollitt, 2022. "The further economic consequences of Brexit: energy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 38(1), pages 165-178.
    2. Hu, Bo & Zhou, P., 2022. "Can the renewable power consumption guarantee mechanism help activate China's power trading market?," Energy, Elsevier, vol. 253(C).
    3. Guo, Bowei & Newbery, David, 2021. "The cost of uncoupling GB interconnectors," Energy Policy, Elsevier, vol. 158(C).
    4. Newbery, David & Gissey, Giorgio Castagneto & Guo, Bowei & Dodds, Paul E., 2019. "The private and social value of British electrical interconnectors," Energy Policy, Elsevier, vol. 133(C).
    5. Yu, Bolin & Fang, Debin & Dong, Feng, 2020. "Study on the evolution of thermal power generation and its nexus with economic growth: Evidence from EU regions," Energy, Elsevier, vol. 205(C).
    6. MacIver, Callum & Bukhsh, Waqquas & Bell, Keith R.W., 2021. "The impact of interconnectors on the GB electricity sector and European carbon emissions," Energy Policy, Elsevier, vol. 151(C).
    7. 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).
    8. Jha, Amit Prakash & Mahajan, Aarushi & Singh, Sanjay Kumar & Kumar, Piyush, 2022. "Renewable energy proliferation for sustainable development: Role of cross-border electricity trade," Renewable Energy, Elsevier, vol. 201(P1), pages 1189-1199.
    9. Geoffrey Mabea, 2023. "Simulating Generalised Locational Marginal Pricing for Power Markets in East Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 450-460, September.
    10. Chen, Hao & Cui, Jian & Song, Feng & Jiang, Zhigao, 2022. "Evaluating the impacts of reforming and integrating China's electricity sector," Energy Economics, Elsevier, vol. 108(C).
    11. Gasmi, Farid & Hanspach, Philip, 2019. "The European Internal Energy Market’s Worth to the UK," TSE Working Papers 19-1052, Toulouse School of Economics (TSE).
    12. Ahmed Gailani & Tracey Crosbie & Maher Al-Greer & Michael Short & Nashwan Dawood, 2020. "On the Role of Regulatory Policy on the Business Case for Energy Storage in Both EU and UK Energy Systems: Barriers and Enablers," Energies, MDPI, vol. 13(5), pages 1-20, March.

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    More about this item

    Keywords

    Electricity Trading; Market Coupling; Brexit;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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