The extent of European power markets

- We analyze the geographical extent of European power markets
- National holidays are used as a source of exogenous variation for identification purposes
- Avoiding typical problems of popular price-based tests such as correlation, cointegration or price-difference analysis
- Regional Markets for 2007-2011: Germany Austria as well as Belgium and the Netherlands.
- Hypothesis of a fully integrated European power market cannot be supported

There is an ongoing debate on the degree of integration of European wholesale power markets. A major task of the European Union is the creation of a common market in Europe and a common power market is an important part of this goal. The literature analyzing the degree of integration of European energy markets is growing and provides mixed results. We add to this literature by using national holidays as exogenous demand shocks to measure integration of European energy markets. Our main findings indicate that integration of European wholesale energy markets has increased with regard to Germany and Austria as well as Belgium and the Netherlands.