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Electricity Markets during the Liberalization: The Case of a European Union Country

Štefan Bojnec and Alan Križaj
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Štefan Bojnec: Faculty of Management, University of Primorska, Izolska vrata 2, SI-6101 Koper-Capodistria, Slovenia
Alan Križaj: Faculty of Management, University of Primorska, Izolska vrata 2, SI-6101 Koper-Capodistria, Slovenia

Energies, 2021, vol. 14, issue 14, 1-21

Abstract: This paper analyzes electricity markets in Slovenia during the specific period of market deregulation and price liberalization. The drivers of electricity prices and electricity consumption are investigated. The Slovenian electricity markets are analyzed in relation with the European Energy Exchange (EEX) market. Associations between electricity prices on the one hand, and primary energy prices, variation in air temperature, daily maximum electricity power, and cross-border grid prices on the other hand, are analyzed separately for industrial and household consumers. Monthly data are used in a regression analysis during the period of Slovenia’s electricity market deregulation and price liberalization. Empirical results show that electricity prices achieved in the EEX market were significantly associated with primary energy prices. In Slovenia, the prices for daily maximum electricity power were significantly associated with electricity prices achieved on the EEX market. The increases in electricity prices for households, however, cannot be explained with developments in electricity prices on the EEX market. As the period analyzed is the stage of market deregulation and price liberalization, this can have important policy implications for the countries that still have regulated and monopolized electricity markets. Opening the electricity markets is expected to increase competition and reduce pressures for electricity price increases. However, the experiences and lessons learned among the countries following market deregulation and price liberalization are mixed. For industry, electricity prices affect cost competitiveness, while for households, electricity prices, through expenses, affect their welfare. A competitive and efficient electricity market should balance between suppliers’ and consumers’ market interests. With greening the energy markets and the development of the CO 2 emission trading market, it is also important to encourage use of renewable energy sources.

Keywords: electricity market liberalization; electricity prices; electricity consumption; electricity market operation; industry; households; decision support systems; Slovenia; European Union; European Energy Exchange (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
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