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Cross-Border Technology Differences and Trade Barriers: Evidence from German and French Electricity Markets

Gugler, Klaus and Haxhimusa, Adhurim (2016) Cross-Border Technology Differences and Trade Barriers: Evidence from German and French Electricity Markets. Department of Economics Working Paper Series, 237. WU Vienna University of Economics and Business, Vienna.

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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. (authors' abstract)

Item Type: Paper
Keywords: Market Integration / Electricity / Renewables / Technology Differences / Jaffe Index
Classification Codes: JEL D47, F15, L81, L98, Q42, Q48
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 03 Nov 2016 10:50
Last Modified: 03 Nov 2016 10:50
URI: http://epub.wu.ac.at/id/eprint/5222

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