Economics at your fingertips  

Elecxit: The cost of bilaterally uncoupling British-EU electricity trade

Joachim Geske, Richard Green and Iain Staffell

Energy Economics, 2020, vol. 85, issue C

Abstract: The UK's withdrawal from the European Union could mean that it leaves the EU's Internal Energy Market for electricity (Elecxit). This paper develops methods to study the longer-term consequences of this electricity market disintegration, especially 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 French and British 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 €700 m a year (2%) compared to remaining in the Internal Energy Market. This result is sensitive to how the British and French electricity systems develop over the coming decades. Economic losses are four times greater (€2700 m a year) if France retains substantial nuclear capacity due to its low marginal costs. Conversely, losses are reduced by two-thirds if UK weakens its decarbonisation ambitions, as lower carbon prices subsidise British fossil fuel generation, allowing electricity prices to converge with those in France. A Hard Elecxit would make British prices rise and French prices fall in three of our four scenarios, with the opposite movements in the fourth scenario.

Keywords: Electricity trading; Market coupling; Brexit (search for similar items in EconPapers)
JEL-codes: L94 F13 F15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.eneco.2019.104599

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-06-20
Handle: RePEc:eee:eneeco:v:85:y:2020:i:c:s0140988319303949