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Since January 1, 2011 the electricity exchanges of Italy and Slovenia are working under a mechanism of market coupling for their respective day-ahead sessions. Similar mechanisms are being implemented in many European countries to foster the integration of power markets that eventually will merge into one large European exchange. This paper is one of the first works in which, by analyzing market results, we try and assess the degree of integration of the Italian and Slovenian electricity markets due to the market coupling policy. Empirical results are useful to evaluate the success of the EU Price Coupling of Regions policy and suggest further enhancements.

In this paper, we study a class of markets, among which we can mention agricultural and energy markets, characterized by seasonality, i.e., in which demand and/or supply conditions cyclically alternate with a precise and known periodicity. We propose a new theoretical framework based on a cobweb model with adaptive expectations, accordingly modified to be consistent with market’s seasonality. The model, consisting in a second-order non-autonomous difference equation, is investigated with the aim of understanding how the periodical nature of the market together with the agents’ expectation formation mechanism affects the resulting dynamics. We analytically prove the emergence of dynamical scenarios that are missing in the classic cobweb model for non-seasonal markets, such as quasi-periodic dynamics and an ambiguous role on stability of the expectation weight. Finally, we discuss their economic rationale with the help of numerical simulations. In such a peculiar economic framework, agents’ learning plays a key role to explain the dynamical properties of economic observables.

In this paper we apply a model of optimal bidding behavior to the Italian wholesale electricity market under three hypotheses: i) costs of generation are private knowledge, ii) firms can be vertically integrated, and iii) firms can sell part of their production in advance with bilateral contracts. We first use optimal bid functions and market data to retrieve time-varying marginal cost functions, price-cost margins and Lerner Indexes of market power for a sample of Italian companies. Then, we use estimated costs and actual equilibrium prices to evaluate the elasticity of these series to fuel price variations and estimate a possible differential impact of the dynamics of input expenditures (fuel price above all) on generation costs and final electricity prices. Our estimates suggest that the elasticities of costs and equilibrium prices with respect to oil price are virtually the same and, therefore, that the auction mechanism per se does not limit the extent to which cost increases are transferred to prices. © 2011 Elsevier B.V.

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of a robust multivariate long-run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of a common long-term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across Europe and by the same marginal generation technology. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we also develop a battery of robust inference procedures that should assure the reliability of our results. Copyright © 2009 John Wiley & Sons, Ltd.

The relationship between wholesale electricity day-ahead and balancing prices is empirically investigated in Italy during years 2012-2014 characterized by high RES generation. We assess the situations of excess demand and excess supply with respect to the differences in quantities promised on the day-ahead market and actually delivered/demanded on real time; hence, we provide empirical evidence on Italian regulation power and corresponding prices. Our results partly confirm those obtained by Skytte (1999). We observe that regulating power prices are not influenced by the amount of regulation in both scenarios; even if they actually behave differently to up- and down-regulation. In addition, we quantify the premia of readiness according to specific selected hours and across Italian zones.

In this paper we study some dynamical features of electricity markets modelling demand and supply by means of a nonlinear cobweb model. We consider a demand function periodically perturbed to take into account the real world seasonalities (daily, weekly and yearly) while supply function can include a stochastic term that is able to encompass possible shocks like outages and plants unavailability. Using adaptive expectations we investigate the effects on equilibrium prices in a perturbed and in an unperturbed model considering peak and off-peak market configurations. The model we propose is based on a well known partial equilibrium model which is used to describe price dynamics of non-storable goods. The novelty we introduce is a sigmoid supply function and a periodically perturbed demand function. Our simulative investigations confirm that the model is able to reproduce several effects observed in real price dynamics. We also focus on how the dynamics can be influenced by altering some market rules set by regulators, like price caps and floors. In particular, we show that taking into account periodical perturbations in the demand function can lead to the anticipation, with respect to the classical model, of chaotic dynamics. Moreover, we study how the dynamic is influenced if negative prices are allowed.

The paper analyses the issue of cost efficiency for eight main European railroads in a sample period of 17 years. Measures of technical and allocative efficiency are obtained from a stochastic cost frontier model, with minimal cost described by a translog cost system. In the model, the cost of allocative inefficiency is estimated simultaneously from the shares' errors, whereas technical inefficiency is modelled by a (half normal) positive departure from the cost frontier. Results show a negligible effect of allocative inefficiency on firms' costs, whereas the cost of technical inefficiency appears to be significant.

In this paper we consider an oligopolistic market in which one firm can be monopolist on her residual demand function and derive implications on the shape of her profit function, which we show may not be concave in price. We propose a simple price-capping rule that induce the pivotal operator to compete for quantity instead of taking advantage of her monopoly. Then, we analyze the bidding behaviour of the dominant electricity producer operating in the Italian wholesale power market (IPEX). This firm is vertically integrated and in many instances she acts as a monopolist on the residual demand. We find that, contrary to expectations, this pivotal firm refrains to exploit totally her unilateral market power and, therefore, bids at levels well below the cap. We discuss such a behaviour and derive implications for the setting of the price cap.

In this paper we derive equilibrium bid functions in isolated domestic electricity markets and then analyse their modifications when cross-border trade among them is managed using the implicit auction method. We show that cross-border trade can induce price convergence across countries and thereby reallocate gains and losses as a result of two concomitant effects: a “volume” effect due to the mere increase/decrease of demand and supply in each market and a “bid effect” due to the modifications of bid functions brought about by interconnection. The latter effect can either contrast or reinforce the former. We derive conditions affecting the net result.