Abstract
Overview
Introduction
There is a shortfall in investment in interconnection capacity in Europe. New
investment is needed, yet existing capacity is not allocated on a market
basis. Datamonitor research shows a very weak relationship between power
prices, interconnector capacity prices and the volume of booked capacity on
most European interconnectors.
Scope
- An overview of power flows between EU markets and the location of
relevance of high-priority transmission interconnection projects.
- An analysis of price arbitrage margins between major markets and their
impact on interconnection capacity prices and reservations.
- An in-depth analysis of which major interconnections have capacity
allocated on a market basis.
- An assessment of which interconnectors have capacity prices that
effectively signal the need for new investment.
Report Highlights
A dynamic view of the relationship between power prices, interconnection
capacity prices and the volume of reserved interconnection capacity shows that
European capacity auctions are not yet functioning on a truly transparent,
market basis.
Interconnection volumes from Spain to France do not demonstrate a consistent
responsiveness to arbitrage margins. There is in fact no statistical
correlation between arbitrage margins and capacity prices or the volume of
capacity reservations.
There are 24 European interconnections that do not exhibit any consistent
relationship (no statistical correlation) between interconnection capacity
volume and capacity prices. These random relationships highlight the absence
of an efficient market dynamic in the pricing and allocation of
interconnection capacity across Europe.
Reasons to Purchase
- Understand the relationship between transmission system interconnections
and the emerging European power market.
- Identify which major interconnectors have capacity allocated on a market
and non-market basis.
- Identify where capacity prices serve as an effective signal for more
infrastructure investment.
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