Economic trading across electricity interconnectors is considered to be a key factor in delivering the economic welfare benefits of an integrated European electricity market. This research examines this assumption as it applies to the... more
Economic trading across electricity interconnectors is considered to be a key factor in delivering the economic welfare benefits of an integrated European electricity market. This research examines this assumption as it applies to the interconnection between the electricity markets in Ireland, Northern Ireland and Great Britain. In doing so it reviews the assumption of economically rational trading behaviour by participants in the market. This assumption underpinned the cost benefit studies justifying construction of the East-West interconnector. Actual patterns of trading that have arisen post commissioning are compared with projected rational behaviour.
The research also considers the consequences of these behavioural differences for the Single Electricity Market re-design project which the Regulatory Authorities on the island are undertaking at present.
The analysis relies on an evaluation and examination of the trading patterns of different operators in the market and also on interviews with selected participants. It concludes that a simple assumption of economically rational behaviour based on apparent price differences between markets can be misleading given a range of other commercial risks apply in the real world.
