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The Impact of Intermittent Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices

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CEEM_Working_Paper_Keppler-Phan-Le_Pen-Boureau.pdf (687.8Kb)
Date
2014
Publisher city
Paris
Publisher
Fondation Paris-Dauphine
Collection title
CEEM Working Paper
Collection Id
2014-7
Dewey
Economie industrielle
Sujet
Electricity market
JEL code
L.L1.L11; L.L9.L94
URI
https://basepub.dauphine.fr/handle/123456789/14119
Collections
  • LEDa : Publications
Metadata
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Author
Boureau, Charlotte
267244 Autre
Le Pen, Yannick
status unknown
Phan, Sébastien
267244 Autre
Keppler, Jan-Horst
status unknown
Type
Document de travail / Working paper
Item number of pages
17
Abstract (EN)
Interconnecting two adjacent areas of electricity production generates benefits in combined consumer surplus and welfare by allowing electricity to flow from the low cost area to the high cost area. It will lower prices in the high cost area, raise them in the low cost area and will thus have prices in the two areas converge. With unconstrained interconnection capacity, price convergence is, of course, complete and the two areas are merged into a single area. With constrained interconnection capacity, the challenge for transport system operators (TSOs) and market operators is using the available capacity in an optimal manner. This was the logic behind the “market coupling” mechanism installed by European power market operators in November 2009 in the Central Western Europe (CWE) electricity market, of which France and Germany constitute by far the two largest members. Market coupling aims at optimising welfare by ensuring that buyers and sellers exchange electricity at the best possible price taking into account the combined order books all power exchanges involved as well as the available transfer capacities between different bidding zones. By doing so, interconnection capacity is allocated to those who value it most.

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