Electricity prices and cross-border trade: Volume and strategy effects
Lucia Parisio () and
Energy Economics, 2008, vol. 30, issue 4, 1760-1775
In this paper we derive equilibrium bid functions in isolated domestic electricity markets and then analyse their modifications when cross-border trade among them is managed using the implicit auction method. We show that cross-border trade can induce price convergence across countries and thereby reallocate gains and losses as a result of two concomitant effects: a "volume" effect due to the mere increase/decrease of demand and supply in each market and a "bid effect" due to the modifications of bid functions brought about by interconnection. The latter effect can either contrast or reinforce the former. We derive conditions affecting the net result.
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Working Paper: Electricity prices and cross-border trade: volume and strategy effects (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:30:y:2008:i:4:p:1760-1775
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