Nuno Carvalho Figueiredo

Integration of Central West Europe spot electricity markets: An update

This paper aims to assess the level of integration of the Central-West Europe (CWE: Germany - EEX, France - Powernext, the Netherlands - APX, Belgium - BPX and Luxembourg) regional electricity spot markets created under the initiative launched by the European Regulators Group for Electricity and Gas and essential to comply with the targets set in the Florence Regulatory Forum. As always, the integration of the European Central-West regional electricity spot markets relies on the physical interconnection between the transmission systems. Development of interconnection capacities within the region has been pursued as reported by the different Transmission System Operators, recognising that interconnection capacity is considered to be a critical factor to ensure market integration. Electricity spot market integration in the CWE region was appraised by assessing day-ahead spot electricity prices (from 1st of January 2007 to the 31st December 2012) in each spot market. Taking into consideration the adoption of the market coupling mechanism between EEX and the trilateral Pow ern ext, APX and BPX on the 9th of November 2010, a structural break in the data was evaluated through Granger-cause and impulse response analysis undertaken based on econometric models. To the best of our knowledge this approach is the first to perform a detailed analysis grounded on several econometric models to trace the effects of the introduction of the market coupling mechanism.

Explanatory variables on south-west spot electricity markets integration

This paper aims to assess some determinants on the integration level of the South West Europe regional electricity spot markets created under the initiative launched by the European Regulators Group for Electricity and Gas. The integration of the European South-West regional electricity spot market relies on the physical interconnection between two pairs of Transmission Systems: Portugal-Spain and Spain-France. Interconnection capacity is thought to be critical to ensure electricity market integration and was therefore studied. Two other determinants were included in our study, corresponding to weather conditions: temperature and wind. Whilst temperature is thought to have influence on demand, wind on the other hand should have influence on available generation. Results obtained from a vector autoregression model specification show interconnection capacities related exogenous variables to not improve the model, whilst average temperature contributes slightly to improve the model. It is to note that the introduction of the exogenous variable average wind speed improves all models’ specification. Strong integration was found between MIBEL markets, leading to the conclusion that Price Splitting mechanism is efficient and contributes to the integration of spot electricity markets. Also, as demonstrated by Grange-causality and impulse response analysis, there is a weak integration level between MIBEL and Powernext.

Market Splitting and the Swedish electricity market

A new index is introduced, the “Market Splitting Hours Share” (MSplit), varying from 0 (perfect price convergence) to 1 (no price convergence), which is inhere defined and, as an application example, used to analyse the most centrally located electricity market in the Nord Pool, the Swedish electricity market. The congestion of the existing interconnections between bidding areas creates the market splitting, with divergent electricity spot prices. The MSplit index is calculated and presented for all Swedish and related adjacent biding areas in the Nord Pool from the 2nd January 2012 to the 31st August 2015. An almost perfect price convergence is found between Swedish bidding areas 1 and 2, whilst the MSplit between Swedish bidding area 2 and 3 does not surpass 0.25, which we consider to be a good price convergence level. Good price convergence level is also found between Swedish bidding areas 3 and 4, with some excursions of the MSplit above 0.25, therefore further interconnection investment might not be worthwhile. As the index herein proposed may be used as a tool to rank other various interconnected electricity markets, MSplit can become an important instrument to be applied by national energy regulators, energy policy makers or transmissions systems operators in order to support these institutions when designing policies concerning interconnection investments.

Wind generation influence on market splitting: The Iberian spot electricity market

This paper aims to assess the influence of wind power generation on the market splitting behaviour of the Iberian electricity spot markets. Iberia stands as an ideal case study, where the high level deployment of wind power is observed, together with an early implementation of the market splitting mechanism between the Portuguese and the Spanish spot electricity markets. Non-parametric models are used to express the probability response for market splitting of day-ahead spot electricity prices as a function of wind and hydro power, together with the available transmission capacity and electricity demand. Non-parametric models overcome known limitations of previously used parametric models, providing additional detail and more efficiently. Model results show that there is an increase of market splitting probability with simultaneous higher wind and hydro power generation and lower available transfer capacity, suggesting that cross-border interconnection development should be linked to the increase in renewable power installation capacity, both current and forecasted.