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We study the co-evolution of the dynamics or co-movement of two electricity markets, the Italian and Greek, by studying the dynamics of their wholesale day-ahead prices, simultaneously in the time-frequency domain. Co-movement is alternatively referred as market integration in financial economics and markets are internationally integrated if the reward for risk is identical regardless the market one trades in. The innovation of this work is the application of wavelet analysis and more specifically the wavelet coherence to estimate the dynamic interaction between these two prices. Our method is compared to other generic econometric tools used in Economics and Finance namely the dynamic correlation and coherence analysis, to study the co-movement of variables of the type related to these two fields. Our study reveals valuable information that we believe will be extremely useful to the authorities as well as other agents participating in these markets to better prepare the national markets towards the European target model, a framework in which the two markets will be coupled.

The rapid adoption of variable renewable generation has created new challenges in the maintenance of power system adequacy. On one hand, its non-dispatchable nature increases the need for firm and flexible load-following peaking power generation. On the other hand, its significantly lower short-run marginal cost raises the missing-money issue, which increases the tendency of conventional generators in terminating their services because of the reduced economic incentives. Therefore, many regulators have begun to implement remedial measures called capacity remuneration mechanisms (CRMs) to curb the problem. Though effective in supporting the operation of these generators, the mechanisms affects the cross-border sharing of generation resources. The shortcomings are discussed in this paper. Afterwards, the paper proposes a mechanism called the flow-based forward capacity mechanism as an alternative for accommodating the involvement of both domestic and foreign capacity generators in the cross-border competition for the supply of capacity generation. The mechanism is able to recover the missing-money bear by the capacity generators in a fair manner. Additionally, it offers a concise method for gradually phasing-out the service of capacity generators as the market transforms into a full RES form. [ABSTRACT FROM PUBLISHER]

We study the co-evolution of the dynamics or co-movement of two electricity markets, the Italian and Greek, by studying the dynamics of their wholesale day-ahead prices, simultaneously in the time-frequency domain. Co-movement is alternatively referred as market integration in financial economics and markets are internationally integrated if the reward for risk is identical regardless the market one trades in. The innovation of this work is the application of wavelet analysis and more specifically the wavelet coherence to estimate the dynamic interaction between these two prices. Our method is compared to other generic econometric tools used in Economics and Finance namely the dynamic correlation and coherence analysis, to study the co-movement of variables of the type related to these two fields. Our study reveals valuable information that we believe will be extremely useful to the authorities as well as other agents participating in these markets to better prepare the national markets towards the European target model, a framework in which the two markets will be coupled. [ABSTRACT FROM AUTHOR]