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Electricity prices and cross-border trade: volume and strategy effects

Lucia Parisio () and Bruno Bosco

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Electricity markets; implicit auctions; cross-border trade (search for similar items in EconPapers)
JEL-codes: D44 L11 L94 (search for similar items in EconPapers)
Date: 2006-10-16
New Economics Papers: this item is included in nep-ene and nep-mic
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Journal Article: Electricity prices and cross-border trade: Volume and strategy effects (2008) Downloads
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