Efficiency of the German electricity wholesale market

Growitsch, Christian and Nepal, Rabindra (2009) Efficiency of the German electricity wholesale market. European Transactions On Electrical Power, 19 4: 553-568. doi:10.1002/etep.324

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Author Growitsch, Christian
Nepal, Rabindra
Title Efficiency of the German electricity wholesale market
Journal name European Transactions On Electrical Power   Check publisher's open access policy
ISSN 1430-144X
Publication date 2009-05-01
Year available 2009
Sub-type Article (original research)
DOI 10.1002/etep.324
Open Access Status Not yet assessed
Volume 19
Issue 4
Start page 553
End page 568
Total pages 16
Place of publication Bognor Regis, West Sussex, United Kingdom
Publisher John Wiley and Sons
Language eng
Abstract One of the major challenges of liberalising European electricity markets is to create competitive and efficient power trading markets. In this paper, we assess the overall efficiency of the German electricity wholesale market using cointegration analysis and error correction modelling. Applying these techniques allows us to evaluate the wholesale market efficiency in terms of price adjustments and the rapidity towards the adjustment in the price discovery and adjustment process. We show that the wholesale market seems to be inefficient and not well functioning. The inability of European Energy Exchange spot market in providing an efficient price reference to the power market suggest that the power exchange still lacks liquidity. Second, our results indicate that bilateral contracts keep the wholesale electricity prices intact with the EEX prices and also stabilise the volatility in the German wholesale market. Also, the econometric results suggest that the existence of the OTC market along with power exchange is creating a competitive effect in the wholesale market in Germany.
Keyword Wholesale market
Power exchange
Market efficiency
Price discovery
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
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Citation counts: TR Web of Science Citation Count  Cited 3 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 7 times in Scopus Article | Citations
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Created: Tue, 22 Oct 2013, 03:19:38 EST by Rabindra Nepal on behalf of School of Economics