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The benefits of integrating European electricity markets

Author

Listed:
  • David Newbery

    (EPRG, University of Cambridge and Control and Power Research Group, Imperial College London)

  • Goran Strbac

    (Control and Power Research Group, Imperial College London)

  • Ivan Viehoff

    (CEPA, London)

Abstract

The European Commission's Target Electricity Model (TEM) aims to integrate EU electricity markets. This paper estimates the potential benefit of coupling interconnectors to increase the efficiency of trading day-ahead, intra-day and balancing services across borders. Further gains are possible by eliminating unscheduled flows and avoiding the curtailment of renewables with better market design. In the short run the gains could be as high as €3.9billion/yr, more than 100% of the current gains from trade. About one-quarter of this total comes from day-ahead coupling and another third from shared balancing. If shared balancing is so valuable, completing the TEM becomes more urgent, and regulators should ensure these gains are paid to interconnectors to make the needed investment in the cross-border links more commercially profitable.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Newbery & Goran Strbac & Ivan Viehoff, 2015. "The benefits of integrating European electricity markets," Working Papers EPRG 1504, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1504
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    References listed on IDEAS

    as
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    4. Böckers, Veit & Haucap, Justus & Heimeshoff, Ulrich, 2013. "Benefits of an integrated European electricity market," DICE Discussion Papers 109, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
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    More about this item

    Keywords

    electricity market coupling; interconnectors; balancing; benefits;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • F15 - International Economics - - Trade - - - Economic Integration
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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