Brexit; Electricity trading; Market coupling; Cross-border trading; Electricity prices; Electricity system; Electricity trade; Internal energy market; Economics and Econometrics; Energy (all); General Energy
Abstract :
[en] The UK's withdrawal from the European Union could mean that it leaves the EU's Internal Energy Market for electricity (Elecxit). This paper develops methods to study the longer-term consequences of this electricity market disintegration, especially the end of market coupling. Before European electricity markets were coupled, different market closing times forced traders to commit to cross-border trading volumes based on anticipated market prices. Interconnector capacity was often under-used, and power sometimes flowed from high- to low-price areas. A model of these market frictions is developed, empirically verified on 2009 data (before French and British market coupling) and applied to estimate the costs of market uncoupling in 2030. A less efficient market and the abandonment of some planned interconnectors would raise generation costs by €700 m a year (2%) compared to remaining in the Internal Energy Market. This result is sensitive to how the British and French electricity systems develop over the coming decades. Economic losses are four times greater (€2700 m a year) if France retains substantial nuclear capacity due to its low marginal costs. Conversely, losses are reduced by two-thirds if UK weakens its decarbonisation ambitions, as lower carbon prices subsidise British fossil fuel generation, allowing electricity prices to converge with those in France. A Hard Elecxit would make British prices rise and French prices fall in three of our four scenarios, with the opposite movements in the fourth scenario.
Disciplines :
Special economic topics (health, labor, transportation...)
Author, co-author :
GESKE, Joachim ; University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT) > FINATRAX ; Imperial College London South Kensington, London, United Kingdom
Green, Richard; Imperial College London South Kensington, London, United Kingdom
Staffell, Iain; Imperial College London South Kensington, London, United Kingdom
External co-authors :
yes
Language :
English
Title :
Elecxit: The cost of bilaterally uncoupling British-EU electricity trade
This work is part of the UK Energy Research Centre's research programme, supported by The Research Councils UK Energy Programme, Grant EP/L024756/1. We would like to thank colleagues within UKERC Theme 3 and Keith Bell, David Newbery, an anonymous referee and participants at Enerday 2018 in Dresden, April 2018; the 41st IAEE International Conference, Groningen, June 2018; the Energy Systems Conference in London, June 2018; the 2nd Dundee Energy Forum, June 2018; E-World in Essen, February 2019; and the Winter School on Energy Market Modelling at Kvitfjell, Norway, March 2019 for helpful comments. The suggestions of two anonymous referees have greatly improved the paper, but we remain responsible for any errors.This work is part of the UK Energy Research Centre's research programme, supported by The Research Councils UK Energy Programme , Grant EP/L024756/1 . We would like to thank colleagues within UKERC Theme 3 and Keith Bell, David Newbery, an anonymous referee and participants at Enerday 2018 in Dresden, April 2018; the 41st IAEE International Conference, Groningen, June 2018; the Energy Systems Conference in London, June 2018; the 2nd Dundee Energy Forum, June 2018; E-World in Essen, February 2019; and the Winter School on Energy Market Modelling at Kvitfjell, Norway, March 2019 for helpful comments. The suggestions of two anonymous referees have greatly improved the paper, but we remain responsible for any errors. Appendix I
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