IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Price Signals in "Energy-only" Wholesale Electricity Markets: An Empirical Analysis of the Price Signal in France

This paper analyzes the price signals of the French wholesale electricity market. We build a model of electricity prices that takes into account several key features of the French electricity market in order to assess the capacity of the price signal to guide investments. Wholesale prices should reflect the imbalances in the generation mix but the signal can be distorted if monopoly rents and/or Òmissing moneyÓ are present. We simulate over the 2003-2005 period theoretical perfectly competitive prices with the installed capacity and with the optimal mix to estimate the capacity imbalances and scarcity rents. We then compare the investment signal sent by observed electricity prices and the theoretical prices with the installed capacity. Although there are signs of market contestability for the mid-merit load, through market integration with the other continental markets, observed prices are too high for the baseload and too low for the peakload, as a result distorting the signal.

Purchase ( $25 )

Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, Q21: Renewable Resources and Conservation: Demand and Supply; Prices, Q24: Renewable Resources and Conservation: Land, Q54: Climate; Natural Disasters and Their Management; Global Warming, Q35: Hydrocarbon Resources, D40: Market Structure, Pricing, and Design: General, D47: Market Design

Keywords: Price signals, Wholesale electricity markets, Empirical analysis, France

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-5

Published in Volume 31, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy