Electricity Market Integration and the Impact of Unilateral Policy Reforms
We investigate the impact that two German energy reforms—phase-out of nuclear power plants after the Fukushima incident and expansion of renewables due to fixed feed-in tariffs—had on neighbouring countries’ consumers. The unilateral German reforms generated substantial negative and positive impacts, respectively, in neighbouring countries with the highest overall effect of German policy found in France, not Germany; an annual negative impact on consumers of 3.15 billion €. We also find significant differences in market integration between neighbouring countries by calculating ratios between the estimated policy decisions’ impacts before and after controlling for interconnector congestion.
We thank Ulrich Laitenberger, Philipp Schmidt-Dengler, Frank Wolak, Oliver Woll, the editor James Forder and two anonymous referees for helpful remarks and Bastian Sattelberger for excellent research assistance. The paper has benefited from presentation at the 2015 CRESSE conference.
Supplementary material is available online at the OUP website. This comprises an online Appendix and the data replication files. The data used in the paper are bought from commercial providers and are not publicly available. Independent researchers, however, can be given access to the data required to run the do-file at ZEW subject to the signing of a data usage contract. The usage contract allows independent researchers to access the data, but not to take the data set away from ZEW.
This work was supported in part by the Engineering and Physical Sciences Research Council of the UK under grant number EP/K002228 to MW. We benefited from the facilities of ZEW in producing the paper.
- Baritaud, M., & Volk, D. (2014). Seamless power markets: Regional integration of electricity markets in IEA member countries. OECD/IEA.Google Scholar
- Booz & Company, Newbery, D., Strbac, G., Pudjianto, D., Noel, P., & LeighFisher. (2013). Benefits of an integrated European energy market. Final Report prepared for European Commission (Directorate-General Energy), Amsterdam.Google Scholar
- Davis, L., & Hausman, C. (2016). Market impacts of a nuclear power plant closure. American Economic Journal: Applied Economics, 8, 92–122.Google Scholar
- De Jong, H., Hakvoort, R., & Sharma, M. (2007). Effects of flow-based market coupling for the CWE region. In Proceedings of the 4th European Congress Economics and Management of Energy in Industry, pp. 1–9.Google Scholar
- European Commission. (2015). Energy Union Package, communication from the Commission to the European Parliament and the Council, achieving the 10% electricity interconnection target, making Europe’s electricity grid fit for 2020, COM(2015) 82 final, Brussels.Google Scholar
- German Ministry for Economic Affairs and Energy. (2014). Stromerzeugungskapazitäten, Bruttostromerzeugung, Energiedaten und Bruttostromverbrauch, Berlin.Google Scholar
- Jauréguy-Naudin, M. (2012). The European power system – Decarbonization and cost reduction: Lost in transmissions? In Note de l’Ifri. Paris.Google Scholar
- Krugman, P., Obstfeld, M., & Melitz, M. (2014). International economics: Theory and policy (10th ed.). Harlow: Prentice Hall.Google Scholar
- Leuthold, F., Rumiantseva, I., Weigt, H., Jeske, T., & von Hirschhausen, C. (2005). Nodal pricing in the German electricity sector – A welfare economics analysis, with particular reference to implementing offshore wind capacities. Working Paper WP-EM-08a, Dresden University of Technology, Chair for Energy Economics and Public Sector Management.Google Scholar
- Neuhoff, K., Barquin, J., Bialek, J., Boyd, R., Dent, C., Echavarren, F., Grau, T., von Hirschhausen, C., Hobbs, B., Kunz, F., Nabe, C., Papaefthymiou, G., Weber, C., & Weigt, H. (2013). Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity. Energy Economics, 40, 760–772.CrossRefGoogle Scholar
- Newbery, D., Strbac, G., & Viehoff, I. (2015). The benefits of integrating European electricity markets. EPRG Working Paper 1504, Cambridge.Google Scholar
- Nitsche, R., Ockenfels, A., Röller, L. H., & Wiethaus, L. (2010). The electricity wholesale sector: Market integration and competition. ESMT White Paper WP-110-01, Berlin.Google Scholar
- Oseni, M. O., & Pollitt, M. G. (2014). Institutional arrangements for the promotion of regional integration of electricity markets. World Bank Development Research Group, Policy Research Working Paper 6947.Google Scholar
- Pellini, E. (2014). Essays on European electricity market integration. PhD Thesis, Surrey Energy Economics Centre, Guildford.Google Scholar
- Pollitt, M. (2009b). Electricity liberalisation in the European union: A progress report. Electricity Policy Research Group Working Paper No. 0929, Cambridge.Google Scholar
- Puka, L., & Szulecki, K. (2014). Beyond the “Grid-Lock” in electricity interconnectors, DIW Discussion Paper 1378, Berlin.Google Scholar
- Ragwitz, M., Winkler, J., Klessmann, C., Gephart, M., & Resch, G. (2012). Recent developments of feed-in systems in the EU – A research paper for the International Feed-In Cooperation, Report Commissioned by the Ministry for the Environment, Nature Conservation and Nuclear Safety, Karlsruhe.Google Scholar