Are Electricity Markets Getting Closer Together
Over the past decade, there have been a large number of papers that have attempted to show that energy markets have grown more integrated. The articles attempt to infer that, because the correlation (in various forms) of prices between markets has increased during the several ten years, there has been a reduction in the transaction costs between markets. This article suggests that a more appropriate modeling technique, based on the theory of arbitrage, is better suited to answering this question. The methodology is then applied to electricity markets in the Western United States.
KeywordsTransaction Cost Electricity Market Price Difference Energy Market Spot Market
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