Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Cross-Border Technology Differences and Trade Barriers: Evidence from German and French Electricity Markets
() and Adhurim Haxhimusa
Abstract: Using hourly data, we show that the convergence of German
and French electricity spot prices depends on the employed generation mix
structure, on the trade (export/import) capacity between the two countries,
and on characteristics of neighbouring markets. Only when German and French
electricity markets employ "similar" generation mixes price spreads vanish,
and the likelihood for congestion of electricity flows is significantly
reduced. This implies that, at least, a part of the convergence that was
documented in recent literature is spurious, because it is not (only)
driven by the forces of arbitrage, but by the similarity of the generation
structures. The direction of congestion matters in this regard.
Furthermore, we document consistent evidence for the most important
predictions of trade theory if markets are characterized by increasing
marginal cost (i.e. supply) curves and limited cross-border capacities.
Keywords: Market Integration, Electricity, Renewables, Technology Differences, Jaffe Index; (follow links to similar papers)
JEL-Codes: D47,; F15,; L81,; L98,; Q42,; Q48; (follow links to similar papers)
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