IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/123709.html
   My bibliography  Save this paper

The European Internal Energy Market’s Worth to the UK

Author

Listed:
  • Gasmi, Farid
  • Hanspach, Philip

Abstract

This article proposes a two-country model of electricity trade under peak-load pricing. We apply the model to France and the UK to assess the benefit to the UK of trade within the European internal energy market (IEM). Calibration and simulations of the model aimed at simulating bilateral trade in the market coupling process at electricity exchanges show the following. First, the occurrence of gains from trade for both countries is highly dependent on whether imported electricity affects the price in the local market and whether imports alleviate scarcity. Second, the main effect of importing electricity is a shift in welfare from domestic producers to domestic consumers of the importing country. Finally, the UK’s membership in the IEM generates additional welfare for the UK of up to 900 M€ per year across a range of scenarios in which the number of on-peak periods are exogenously varied in a conservative way relative to the actual data.

Suggested Citation

  • 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).
    • Handle: RePEc:tse:wpaper:123709
    as

    Download full text from publisher

    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2019/wp_tse_1052.pdf
    File Function: Full Text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Malaguzzi Valeri, Laura, 2009. "Welfare and competition effects of electricity interconnection between Ireland and Great Britain," Energy Policy, Elsevier, vol. 37(11), pages 4679-4688, November.
    2. Brunekreeft, Gert & Neuhoff, Karsten & Newbery, David, 2005. "Electricity transmission: An overview of the current debate," Utilities Policy, Elsevier, vol. 13(2), pages 73-93, June.
    3. Finon, Dominique & Pignon, Virginie, 2008. "Electricity and long-term capacity adequacy: The quest for regulatory mechanism compatible with electricity market," Utilities Policy, Elsevier, vol. 16(3), pages 143-158, September.
    4. Meeus, Leonardo & Purchala, Konrad & Belmans, Ronnie, 2005. "Development of the Internal Electricity Market in Europe," The Electricity Journal, Elsevier, vol. 18(6), pages 25-35, July.
    5. Thomas-Olivier Léautier, 2016. "The Visible Hand: Ensuring Optimal Investment in Electric Power Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    6. Mario J. Miranda & Paul L. Fackler, 2004. "Applied Computational Economics and Finance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633094, April.
    7. Benjamin Bental & S. Abraham Ravid, 1982. "A Simple Method for Evaluating the Marginal Cost of Unsupplied Electricity," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 249-253, Spring.
    8. Anderson, Roland & Taylor, Lewis, 1986. "The social cost of unsupplied electricity : A critical review," Energy Economics, Elsevier, vol. 8(3), pages 139-146, July.
    9. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    10. Dominique Finon & Virginie Pignon, 2008. "Electricity and long-term capacity adequacy: The quest for regulatory mechanism compatible with electricity market," Post-Print hal-00716312, HAL.
    11. Geske, Joachim & Green, Richard & Staffell, Iain, 2020. "Elecxit: The cost of bilaterally uncoupling British-EU electricity trade," Energy Economics, Elsevier, vol. 85(C).
    12. Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, vol. 30(4), pages 1659-1671, July.
    13. Neuhoff, Karsten & Newbery, David, 2005. "Evolution of electricity markets: Does sequencing matter?," Utilities Policy, Elsevier, vol. 13(2), pages 163-173, June.
    14. Lilliestam, Johan & Ellenbeck, Saskia, 2011. "Energy security and renewable electricity trade--Will Desertec make Europe vulnerable to the "energy weapon"?," Energy Policy, Elsevier, vol. 39(6), pages 3380-3391, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    2. Ochoa, Camila & van Ackere, Ann, 2015. "Does size matter? Simulating electricity market coupling between Colombia and Ecuador," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1108-1124.
    3. Jacques Pelkmans & Lionel Kapff, 2010. "Interconnector Investment for a Well-functioning Internal Market. What EU regime of regulatory incentives?," Bruges European Economic Research Papers 18, European Economic Studies Department, College of Europe.
    4. Juha Teirilä and Robert A. Ritz, 2019. "Strategic Behaviour in a Capacity Market? The New Irish Electricity Market Design," The Energy Journal, International Association for Energy Economics, vol. 0(The New E).
    5. Foley, A.M. & Ó Gallachóir, B.P. & McKeogh, E.J. & Milborrow, D. & Leahy, P.G., 2013. "Addressing the technical and market challenges to high wind power integration in Ireland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 19(C), pages 692-703.
    6. Rabindra Nepal & John Foster, 2016. "Testing for Market Integration in the Australian National Electricity Market," The Energy Journal, , vol. 37(4), pages 215-238, October.
    7. Simshauser, Paul, 2020. "Merchant renewables and the valuation of peaking plant in energy-only markets," Energy Economics, Elsevier, vol. 91(C).
    8. Keppler, Jan Horst, 2017. "Rationales for capacity remuneration mechanisms: Security of supply externalities and asymmetric investment incentives," Energy Policy, Elsevier, vol. 105(C), pages 562-570.
    9. Simshauser, Paul, 2022. "Rooftop solar PV and the peak load problem in the NEM's Queensland region," Energy Economics, Elsevier, vol. 109(C).
    10. Weiss, Olga & Bogdanov, Dmitry & Salovaara, Kaisa & Honkapuro, Samuli, 2017. "Market designs for a 100% renewable energy system: Case isolated power system of Israel," Energy, Elsevier, vol. 119(C), pages 266-277.
    11. Paul Simshauser, 2021. "Lessons from Australia's National Electricity Market 1998-2018: strengths and weaknesses of the reform experience," Chapters, in: Jean-Michel Glachant & Paul L. Joskow & Michael G. Pollitt (ed.), Handbook on Electricity Markets, chapter 9, pages 242-286, Edward Elgar Publishing.
    12. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Interconnections and market integration in the Irish Single Electricity Market," Energy Policy, Elsevier, vol. 51(C), pages 425-434.
    13. Simshauser, Paul & Gilmore, Joel, 2022. "Climate change policy discontinuity & Australia's 2016-2021 renewable investment supercycle," Energy Policy, Elsevier, vol. 160(C).
    14. Muireann Á. Lynch & Richard Tol & Mark J. O’Malley, 2014. "Minimising costs and variability of electricity generation by means of optimal electricity interconnection utilisation," Working Paper Series 6814, Department of Economics, University of Sussex Business School.
    15. Simshauser, Paul, 2019. "Missing money, missing policy and Resource Adequacy in Australia's National Electricity Market," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    16. Simshauser, Paul, 2018. "On intermittent renewable generation & the stability of Australia's National Electricity Market," Energy Economics, Elsevier, vol. 72(C), pages 1-19.
    17. Teirila, J., 2017. "Market Power in the Capacity Market? The Case of Ireland," Cambridge Working Papers in Economics 1727, Faculty of Economics, University of Cambridge.
    18. Simshauser, P., 2021. "Rooftop Solar PV and the Peak Load Problem in the NEM’s Queensland Region," Cambridge Working Papers in Economics 2180, Faculty of Economics, University of Cambridge.
    19. Sakellaris, Kostis, 2009. "The Greek Capacity Adequacy Mechanism: Design, Incentives, Strategic Behavior and Regulatory Remedies," MPRA Paper 24642, University Library of Munich, Germany.
    20. Elberg, Christina, 2014. "Cross-Border Effects of Capacity Mechanisms in Electricity Markets," EWI Working Papers 2014-11, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

    More about this item

    Keywords

    Electricity; Market Coupling; Brexit; Calibration; Simulation.;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:123709. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.