Integration and convergence in European electricity markets

Davide Ciferri (), Maria Chiara D’Errico () and Paolo Polinori
Additional contact information
Davide Ciferri: Cassa Depositi e Prestiti
Maria Chiara D’Errico: University of Perugia
Authors registered in the RePEc Author Service: Maria Chiara D'Errico

Economia Politica: Journal of Analytical and Institutional Economics, 2020, vol. 37, issue 2, No 5, 463-492

Abstract: Abstract This paper investigates the degree of integration among markets using wholesale electricity prices, which arises from the link between the long-run dynamics of fuel prices and electricity prices. We address the question of whether European electricity markets have experienced convergence patterns in recent years, using the stochastic definitions of convergence and common trend based on cointegration analysis. We apply a vector error correction model to a representative sample of electricity spot prices of European markets, including those of Italy, France, the Netherlands, Poland, and the integrated market of Germany and Austria. We analyze both the long- and the short-run system properties, studying their persistence profiles. The short-run analysis reveals the non-significance of adjustment coefficients of the market prices in the Netherlands and Poland. Moreover, the Netherlands Granger causes Poland and the integrated market of German and Austria, but the reverse is not true. A unidirectional Granger causality is also found for France and Germany and Austria toward Italy. Given the cointegrating equilibrium, all country-specific price dynamics converge toward the steady state, but most of the exogenous shocks have permanent effects. Forecast error variance decomposition analysis clearly highlights that orthogonalized shocks largely affect the variance of neighboring markets.

Keywords: European electricity market; Electricity spot price; Cointegration analysis; Vector error correction model (search for similar items in EconPapers)
JEL-codes: C32 L16 Q41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://link.springer.com/10.1007/s40888-019-00163-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Integration and convergence in European electricity markets (2013)
Working Paper: Integration and Convergence in European Electricity Markets (2013)
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: https://EconPapers.repec.org/RePEc:spr:epolit:v:37:y:2020:i:2:d:10.1007_s40888-019-00163-7

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40888

DOI: 10.1007/s40888-019-00163-7

Access Statistics for this article

Economia Politica: Journal of Analytical and Institutional Economics is currently edited by Alberto Quadrio Curzio

More articles in Economia Politica: Journal of Analytical and Institutional Economics from Springer, Fondazione Edison
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().