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ID:
163532
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| Summary/Abstract |
We employ hourly data from German and French electricity markets and show that integration of German and French electricity markets depends on the technology mix and the characteristics of neighbouring markets. Only when German and French electricity markets employ ‘similar’ generation mixes price spreads and the likelihood of the congestion of electricity flows are significantly reduced. We find that up to 31% of the price convergence is not attributed to the forces of arbitrage backed by interconnection capacities, but it is driven by coincident similarities in technology mixes. Furthermore, we document consistent evidence for the most important predictions of trade theory if markets are characterised by increasing marginal cost curves and limited cross-border capacities, i.e. limited convergence, congestion and cross-border externalities. Our results call for a coordinated European energy policy.
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| 2 |
ID:
169750
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| Summary/Abstract |
The projected rate of productivity growth is the critical determinant of the price cap in incentive regulation. However, the regulatory authorities generally lack sophisticated industry TFP studies to set an optimal cap. We thus estimate productivity growth in the Austrian gas distribution sector in a translog cost function framework. A key feature is our unique panel database on costs and outputs of regulated utilities for the period 2002–2013, covering six years prior and during incentive regulation as introduced in 2008. We find a modest TFP growth rate in the early sample years, followed by a decline to zero or even slightly negative rates in recent years. We also find a significant potential for returns to scale, which is left unexploited, indicating that utilities could significantly save on costs by merging. As essential investments have already been undertaken in the past, opportunities for technological progress seem to be limited in recent years.
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