Interconnections and market integration in the Irish Single Electricity Market

• Published in: Energy policy Vol. 51; pp. 425 - 434
• Main Authors: Nepal, Rabindra, Jamasb, Tooraj
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01-12-2012; Elsevier; Elsevier Science Ltd
• Subjects: Alternative energy; Applied sciences; Competition; Economic data; Economic integration; Electric energy; Electric power; Electrical industries; Energy; Energy economics; Energy industry; Energy market; Energy policy; Europe; European organizations; Exact sciences and technology; General, economic and professional studies; Great Britain; Integration; Ireland; Liquidity; Market integration; Markets; Methodology. Modelling; Renewable resources; Studies; United Kingdom; Wholesale; Europe; Ireland; British Isles; Competition; C22; L94; D02; Market integration; Liquidity; G1; Integration; Electric energy transportation; Kalman filter; Single market; Wholesale market; Network interworking; European Union; Measurement method; Competition(economy)
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2012.08.047

Interconnections can be an effective way to increase competition and improve market integration in concentrated wholesale electricity markets with limited number of participants. This paper examines the potential for interconnections and increasing market integration in the Irish Single Electricity Market (SEM). We use a time-varying Kalman filter technique to assess the degree of market integration between SEM and other large, mature and interconnected wholesale electricity markets in Europe including Great Britain (GB). The results indicate no market integration between SEM and other European markets except for Elspot and GB. We show that the current state of market integration between SEM and GB is just 17% indicating potential to improve market integration via increased interconnector capacity. The results indicate that liquidity of wholesale markets might be a crucial factor in the market integration process while our results remain inconclusive in determining whether increased trade of renewables can improve market integration.
► We assess the degree of market integration between SEM and other EU electricity markets. ► Our results indicate no market integration between SEM and other European markets except for Elspot and GB. ► We show that the current state of market integration between SEM and GB is just 17%.