Cross-border effects on electricity spot prices - a meta-study
Jilles De Blauwe, M. Deissenroth, Henrik Mantke, Dogan Keles
Abstract
In recent years, the expansion of transmission capacity and coupling of electricity spot markets have enabled actors to participate in neighboring zones’ spot markets. Whereas spot prices were previously driven solely by zonal drivers, are now increasingly influenced by drivers from neighboring zones, such as renewable electricity generation or load. This meta-study, the first of its kind, presents a comprehensive overview of the literature on cross-border effects on spot prices, demonstrating how domestic drivers can impact a neighboring zone’s prices. An overview of the existing literature is first presented, detailing the markets, time periods, and effects studied. Then, we provide an extensive discussion of the methods used and the findings obtained in each study. These findings indicate that the Central Western European markets are highly integrated, sharing common underlying drivers. However, the integration with more peripheral markets can still be improved. Some effects, such as those from the renewable generation in Germany, exert a clear influence on neighboring zones. The largest effects, however, were observed for small zones located close to major renewable generation centers, such as for West-Denmark and West-Texas, and neighboring larger markets, such as Switzerland. Thus, this study clearly underscores the importance of considering cross-border effects for understanding price drivers or when making policy and investment decisions.