Price Setters and Price Takers in the EU Electricity Market, a Comparative Analysis of Household Consumer Prices

Abstract

The article is concerned with the analysis of the electric power prices at the European spot exchanges, taking in consideration 27 Countries of the Union (excluding UK). The time series data are considering the half yearly average of the countries, as reported by the Eurostat database. The article examines the way spot prices are influenced by power exchanges, based on the overall installed power of more healthier economies. In recent years a growing capacity from renewable sources is pouring in the system, anyway the implementation of renewable energies do not guarantee constant supply to the network as they depend on weather conditions and therefore must still have recourse to conventional generation types - such as gas and coal - which generally have higher operating costs than renewable. An increasing number of Member States have adjusted mechanisms to promote investment in power plants or provided incentives to keep them standing. These public measures may be justified in certain situations but according to recent guidelines, the European Commission has established that the adjustment mechanisms can be in contrast with the legislation on state aid. The identification of these discrepancies is studied in this article through the key characteristics of the price differential for the EU spot markets. The inflation generated from the price adjustments within the EU members can be considered an important indicator of market inefficiency.

Key words: electricity spot exchanges, subsidies, price setter, price taker, household consumers.