Impact of bidding zone re-configurations on electricity prices: Evidence from Sweden

Luisa Loiacono, Leonzio Rizzo and Carlo Stagnaro

Energy Economics, 2025, vol. 141, issue C

Abstract: In the European Union's electricity wholesale markets, energy is traded across large bidding zones, which, in most cases coincide with national borders: the so-called zonal markets. Within each market zone, energy flows are supposed to be free of transmission constraints. However, in some cases transmission constraints exist, implying an inefficient mismatch between demand and supply in different areas where the zonal market holds. Does transition to a more homogeneous multi-zonal market change equilibrium prices by facilitating a better balance between demand and supply when transmission constraints hold? We answer this question, by testing if the market re-configuration from one bidding zone to four zones, together with the commitment to not limit export with the neighboring countries, which took place in Sweden in November 2011, implied a change in prices. We perform a Regression Discontinuity in Time (RDiT) to compare change in prices in the four zones of Sweden. We find that, after November 2011, electricity prices increase across all zones with a stronger effect in southern Sweden.

Keywords: Electricity market; Bidding zone; Wholesale market price; Zonal market; Transmission constraint (search for similar items in EconPapers)
JEL-codes: D47 L94 L98 Q41 Q48 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324008156

DOI: 10.1016/j.eneco.2024.108106

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