Multinational Electricity Market Integration and Electricity Price Dynamics

Jens Lundgren (jens.lundgren@econ.umu.se), Jörgen Hellström (jorgen.hellstrom@econ.umu.se) and Niklas Rudholm (niklas.rudholm@huiresearch.se)
Additional contact information
Jens Lundgren: Department of Economics, Postal: Umeå University, SE-901 87 Umeå, Sweden
Jörgen Hellström: Department of Economics, Postal: Umeå University, SE-901 87 Umeå, Sweden
Niklas Rudholm: The Swedish Retail Institute, Postal: Regeringsgatan 60, 103 29 Stockholm, Sweden

No 16, HUI Working Papers from HUI Research

Abstract: The paper empirically explores the electricity price dynamics in the Nordic electricity market, Nord Pool. In particular, the focus is on determining what effect the multinational market integration, during the years 1996-2006, has had on the conditional mean electricity price, its volatility, the price jump-intensity and the price jump size. Empirically the study reveals that the conditional mean electricity price increased when Finland joined the Nord Pool exchange, and the price remained at the higher level when Denmark also joined. Turning to the price volatility, this increased when Finland joined, mainly due to an increase in jump size, and decreased when Denmark also joined Nord Pool. However, the price jump-intensity decreased both when Finland and Denmark joined the market. This means that a large electricity market integration in Scandinavia seems to reduce the probability of sudden price jumps. That is, the multinational electricity market integration in Scandinavia seems to have created a market that handles external shocks to supply and demand better than the separate national electricity markets previous did.

Keywords: Electricity price; market integration; jump risk; EGARCH; Exponential Autoregressive conditional Jump Intensity (search for similar items in EconPapers)
JEL-codes: C22 L10 L69 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2008-04-15
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Lundgren, Jens, Jörgen Hellström and Niklas Rudholm, 'Multinational Electricity Market Integration and Electricity Price Dynamics' in Proceedings of the EEM 2008 - 5th International Conference on the European Electricity Market, 2008.

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:hhs:huiwps:0016

Access Statistics for this paper

More papers in HUI Working Papers from HUI Research Handelns Forskningsinstitut, c/o HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Hans Seerar Westerberg (hans.westerberg@huiresearch.se).