Work

Impact of bidding zone re-configurations on electricity prices: Evidence from Sweden

Year: 2024

Type: article

Abstract: In the European Union's electricity wholesale markets, energy is traded across large bidding zones, which, in most cases coincide with national borders: the so-called zonal markets. Within each market zone, energy flows are supposed to be free of transmission constraints. However, in some cases transmission constraints exist, implying an inefficient mismatch between demand and supply in different areas where the zonal market holds. Does transition to a more homogeneous multi-zonal market change equilibrium prices by facilitating a better balance between demand and supply when transmission constraints hold? We answer this question, by testing if the market re-configuration from one bidding zone to four zones, together with the commitment to not limit export with the neighboring countries, which took place in Sweden in November 2011, implied a change in prices. We perform a Regression Discontinuity in Time (RDiT) to compare change in prices in the four zones of Sweden. We find that, after November 2011, electricity prices increase across all zones with a stronger effect in southern Sweden.

Source: Energy Economics

DOI: 10.1016/j.eneco.2024.108106

Authors: Luisa Loiacono, Leonzio Rizzo, Carlo Stagnaro

Institutions: University of Ferrara, Barcelona School of Economics

Language: English

Topic: Electric Power System Optimization

Subfield: Electrical and Electronic Engineering

Field: Engineering

Domain: Physical Sciences

SDGs: Affordable and clean energy, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $3,680