Electricity Market Integration and the Impact of Unilateral Policy Reforms

We investigate the impact that two German energy reforms—phase-out of nuclear power plants after the Fukushima incident and expansion of renewables due to fixed feed-in tariffs—had on neighbouring countries’ consumers. The unilateral German reforms generated substantial negative and positive impacts, respectively, in neighbouring countries with the highest overall effect of German policy found in France, not Germany; an annual negative impact on consumers of €3.15 billion. We also find significant differences in market integration between neighbouring countries by calculating ratios between the estimated policy decisions’ impacts before and after controlling for interconnector congestion.

Grossi, Luigi, Sven Heim, Kai Hüschelrath and Michael Waterson (2018), Electricity Market Integration and the Impact of Unilateral Policy Reforms, Oxford Economic Papers 70(3) , 799-820