Developing the Internal Electricity Market in Europe

Electricity markets of the EU member states are too weakly integrated to create a truly European market. That is the point of view of the following paper by the ESAT-Electa group of the KULeuven. It explains how the current situation has come about, before proposing a step-by-step plan to link national markets. The latter is crucial to stabilize prices, avoid local market power abuse, and consolidate best practices. An important task for the European Union is to facilitate investment for removing cross-border capacity bottlenecks. Once interconnection capacity is sufficient and functions according to market principles, the national day-ahead Power Exchanges - setting price references - could be integrated into a centrally coordinated market place. The same could be done with the markets trading reserve power for balancing.