Electricity Prices in the European Union Region: The Role of Renewable Energy Sources, Key Economic Factors and Market Liberalization
Abstract
:1. Introduction
2. State of the Art
3. Methodology and Data
3.1. Data Summary
3.2. Causality Analysis
3.2.1. Pearson Correlation Test
3.2.2. Dimitrescu-Hurlin (2012) Causality Test
3.3. Model Specification
3.4. Cross-Sectional Dependence Tests
3.5. Panel Unit Root Tests
3.6. Panel Cointegration Tests
3.7. Heteroskedasticity, Serial-Correlation, and Omitted Variable Tests
3.8. Econometric Methodology
4. Empirical Analysis and Results
4.1. Static Analysis
4.2. Dynamic Analysis
5. Discussion and Policy Implications
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
Abbreviations and Acronyms
RES | Renewable Energy Sources |
EU | European Union |
EC | European Commission |
GDP | Gross Domestic Products |
GFCF | Gross Fixed Capital Formation |
GWh | Giga Watt hour |
MWh | Mega Watt hour |
UN | United Nations |
SDG | Sustainable Development Goal |
Appendix A
Basic Model | Competition Model | |||
---|---|---|---|---|
Statistic | p-Value | Statistic | p-Value | |
Poolability test | 7.033 | 0.0000 | 6.227 | 0.0000 |
Breusch-Pagan LM test | 994.6 | 0.0000 | 1025.9 | 0.0000 |
Joint significance F-test (FE) | 31.13 | 0.0000 | 27.16 | 0.0000 |
Time-Effects test (FE) | 67.368 | 0.0000 | 71.39 | 0.0000 |
Hausman test | 50.02 | 0.0000 | 48.82 | 0.0000 |
Basic Model | Competition Model | ||||
---|---|---|---|---|---|
Variable | VIF | 1/VIF | Variable | VIF | 1/VIF |
Renewables | 1.12 | 0.8896 | Market Share | 1.48 | 0.6753 |
Electricity GFCF | 1.08 | 0.9272 | Secondary Autoproducers | 3.00 | 0.3332 |
Environmental Tax | 1.06 | 0.9400 | Main Electricity Retailers | 1.37 | 0.7276 |
Economic Globalization | 1.01 | 0.9896 | Total Electricity Retailers | 2.89 | 0.3464 |
- The impact of RES and economic outward-orientation on electricity prices is assessed;
- Optimal RES participation in electricity generation fuel mix is approximated;
- The role of market liberalization in European electricity prices is investigated;
- The importance of the deregulation process in energy policy-making is evaluated;
- Time horizon until the convergence of electricity prices in policy changes is estimated.
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Electricity Price (Euro Per MWh) | Renewables (% Total Fuel Mix) | Electricity GFCF (% GDP) | Environmental Tax (Billion Euro) | Economic Globalization Index | Market Share Largest Generator (% Total) | Secondary Autoproducers (GWh) | Main Electricity Retailers (≥5% Total Market Share) | Total Electricity Retailers | |
---|---|---|---|---|---|---|---|---|---|
Mean | 112.36 | 31.13 | 1.06 | 12.77 | 78.25 | 50.01 | 1.92 | 3.97 | 142.55 |
Median | 110.00 | 24.28 | 0.85 | 5.79 | 78.28 | 45.10 | 0.68 | 4.00 | 47.00 |
Std. dev. | 30.16 | 24.67 | 0.67 | 19.07 | 7.11 | 23.86 | 2.53 | 2.06 | 244.37 |
Minimum | 50.50 | 0.48 | 0.00 | 0.16 | 51.66 | 3.00 | 0.00 | 1.00 | 1.00 |
Maximum | 213.00 | 99.47 | 4.27 | 61.12 | 92.85 | 97.00 | 11.99 | 9.00 | 1485.00 |
Skewness | 0.62 | 1.03 | 1.79 | 1.72 | −0.33 | 0.33 | 1.76 | 0.43 | 3.21 |
Kurtosis | 3.55 | 3.34 | 7.13 | 4.60 | 2.81 | 1.80 | 5.49 | 2.53 | 14.26 |
Jarque-Bera | 33.57 *** | 79.69 *** | 550.8 *** | 8.85 ** | 8.84 *** | 30.51 *** | 317.00 *** | 16.16 *** | 2859.00 *** |
Variable | Electricity Price | Renewables | Renewables 2 | Electricity GFCF | Environmental Tax | Economic Globalization |
---|---|---|---|---|---|---|
Electricity Price | 1.0000 | |||||
Renewables | 0.0701 (0.1411) | 1.0000 | ||||
Renewables 2 | 0.0218 (0.6475) | 0.9527 *** (0.0000) | 1.0000 | |||
Electricity GFCF | −0.2900 *** (0.0000) | −0.0757 (0.1118) | −0.0839 * (0.0781) | 1.0000 | ||
Environmental Tax | 0.2298 *** (0.0000) | 0.0425 (0.3731) | −0.0137 (0.7732) | −0.2083 *** (0.0000) | 1.0000 | |
Economic Globalization | 0.3643 *** (0.0000) | −0.0464 (0.3308) | −0.0199 (0.6760) | −0.2303 *** (0.0000) | −0.1875 *** (0.0001) | 1.0000 |
Variable | Electricity Price | Market_Share Largest Generator | Secondary Autoproducers | Main Electricity Retailers | Total Electricity Retailers |
---|---|---|---|---|---|
Electricity Price | 1.0000 | ||||
Market_Share Largest Generator | −0.2279 *** (0.0000) | 1.0000 | |||
Secondary Autoproducers | 0.3739 *** (0.0000) | −0.2858 *** (0.0000) | 1.0000 | ||
Main Electricity Retailers | −0.0175 (0.7251) | −0.4462 *** (0.0000) | −0.1316 *** (0.0078) | 1.0000 | |
Total Electricity Retailers | 0.2660 *** (0.0000) | −0.2937 *** (0.0000) | 0.8083 *** (0.0000) | −0.0626 (0.2067) | 1.0000 |
Null Hypothesis: | Obs | Test-Statistic | p-Value |
---|---|---|---|
Electricity Price does not Granger Cause Renewables | 438 | 2.5687 | 0.0102 |
Electricity Price does not Granger Cause Environmental Tax | 438 | 2.7679 | 0.0056 |
Economic Globalization does not Granger Cause Electricity Price | 438 | 3.0238 | 0.0025 |
Renewables do not Granger Cause Electricity GFCF | 438 | 4.5606 | 0.0000 |
Renewables do not Granger Cause Environmental Tax | 438 | 2.0831 | 0.0372 |
Environmental Tax does not Granger Cause Renewables | 438 | 3.1718 | 0.0015 |
Renewables do not Granger Cause Economic Globalization | 438 | 2.6687 | 0.0076 |
Null Hypothesis: | Obs | Test-Statistic | p-Value |
---|---|---|---|
Electricity Price does not Granger Cause Market Share | 404 | 2.8923 | 0.0038 |
Market Share does not Granger cause Electricity Price | 404 | 2.4870 | 0.0129 |
Secondary Autoproducers does not Granger cause Electricity Price | 404 | 3.8407 | 0.0001 |
Electricity Price does not Granger Cause Total Retailers | 404 | 3.0426 | 0.0023 |
Secondary Autoproducers does not Granger cause Market Share | 404 | 7.7739 | 0.0000 |
Market Share does not Granger Cause Total Retailers | 404 | 3.3445 | 0.0008 |
Total Retailers does not Granger cause Market Share | 404 | 3.3490 | 0.0008 |
Secondary Autoproducers does not Granger Cause Total Retailers | 404 | 3.9646 | 0.0001 |
Total Retailers does not Granger Cause Main Electricity Retailers | 404 | 7.6239 | 0.0000 |
Variable | Pesaran (2004) CDtest | Correlation (Average) | Correlation (Absolute) | Pesaran (2015) Weak CDtest |
---|---|---|---|---|
Electricity Price | 30.46 *** (0.000) | 0.410 | 0.518 | 73.309 *** (0.000) |
Renewables | 49.18 *** (0.000) | 0.662 | 0.757 | 69.584 *** (0.000) |
Renewables 2 | 47.42 *** (0.000) | 0.638 | 0.717 | 64.828 *** (0.000) |
ElectricityGFCF | 6.36 *** (0.000) | 0.086 | 0.375 | 68.832 *** (0.000) |
Environmental Tax | 53.16 *** (0.000) | 0.715 | 0.718 | 73.359 *** (0.000) |
Economic Globalization | 36.41 *** (0.000) | 0.490 | 0.612 | 74.280 *** (0.000) |
Market Share | 17.05 *** (0.000) | 0.251 | 0.480 | 9.919 *** (0.000) |
Secondary Autoproducers | 10.04 *** (0.000) | 0.147 | 0.471 | 13.265 *** (0.000) |
Main Electricity Retailers | 2.11 *** (0.035) | 0.031 | 0.413 | 5.937 *** (0.000) |
Total Electricity Retailers | 16.00 *** (0.000) | 0.234 | 0.493 | 18.763 *** (0.000) |
Basic Model | Competition Model | |
---|---|---|
Pesaran’s test of cross-sectional independence | 10.034 *** (0.000) | 12.371 *** (0.000) |
Friedman’s test of cross-sectional independence | 67.913 *** (0.000) | 19.500 (0.671) |
Frees’ test of cross-sectional independence | 3.589 | 1.669 |
Critical values from Frees’ Q distribution: | Alpha = 0.10 0.1521 | Alpha = 0.10 0.3169 |
Alpha = 0.05 0.1996 | Alpha = 0.05 0.4325 | |
Alpha = 0.01 0.2928 | Alpha = 0.01 0.6605 |
Level | First-Difference | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Intercept | Intercept and Trend | Intercept | Intercept and Trend | |||||||||
Variable | LLC | ADF-Fisher | CIPS | LLC | ADF-Fisher | CIPS | LLC | ADF-Fisher | CIPS | LLC | ADF-Fisher | CIPS |
Electricity Price | −7.337 *** (0.000) | 59.698 (0.216) | −2.125 | 5.791 *** (0.000) | 38.629 (0.915) | −2.617 | −10.625 *** (0.000) | 89.476 *** (0.000) | −3.933 *** | −8.18 *** (0.000) | 91.496 *** (0.000) | −4.021 *** |
Renewables | 3.231 (0.999) | 18.104 (1.000) | −2.397 *** | −3.115 *** (0.009) | 37.613 (0.933) | −2.640 | −11.149 *** (0.000) | 157.601 *** (0.000) | −3.710 *** | −7.652 *** (0.000) | 136.259 *** (0.000) | −3.864 *** |
Renewables 2 | 7.911 (1.000) | 18.813 (1.000) | −2.445 *** | 2.720 (0.996) | 31.248 (0.990) | −2.641 | −5.386 *** (0.000) | 130.804 *** (0.000) | −3.478 *** | −2.668 *** (0.000) | 121.289 *** (0.000) | −3.709 *** |
Electricity GFCF | −1.764 (0.038) | 61.258 (0.177) | −2.053 | −3.991 *** (0.000) | 82.796 *** (0.004) | −2.916 *** | −10.415 *** (0.000) | 248.007 *** (0.000) | −4.110 *** | −3.025 *** (0.000) | 203.299 *** (0.000) | −3.999 *** |
Environmental Tax | 1.651 (0.950) | 20.647 (1.000) | −1.976 | −2.297 ** (0.011) | 31.237 (0.990) | −1.858 | −12.109 *** (0.000) | 146.501 *** (0.000) | −3.556 *** | −6.112 *** (0.000) | 114.260 *** (0.000) | −3.786 *** |
Economic Globalization | −5.075 *** (0.000) | 41.533 (0.850) | −2.875 *** | −4.568 *** (0.000) | 45.183 (0.736) | −3.536 *** | −15.455 *** (0.000) | 195.996 *** (0.000) | −4.421 *** | −8.591 *** (0.000) | 129.593 *** (0.000) | −4.488 *** |
Market Share | −1.170 (0.177) | 53.273 (0.000) | −2.794 *** | 0.957 (0.830) | 142.990 *** (0.000) | −2.706 ** | −16.734 *** (0.000) | 269.910 *** (0.000) | −5.376 *** | −2.846 *** (0.002) | 190.979 *** (0.000) | −5.315 *** |
Secondary Autoproducers | 3.668 (0.000) | 42.058 (0.713) | −1.663 | −10.066 (0.000) | 96.315 *** (0.000) | −1.791 | −18.026 *** (0.000) | 102.580 *** (0.000) | −3.087 *** | −13.879 *** (0.000) | 97.070 *** (0.000) | −3.339 *** |
Main Electricity Retailers | 0.193 (0.576) | 96.737 (0.000) | −1.646 | −2.172 ** (0.014) | 79.598 ** (0.014) | −2.487 ** | −5.851 *** (0.000) | 97.359 *** (0.000) | −3.731 *** | −7.693 *** (0.000) | 149.959 *** (0.000) | −3.816 *** |
Total Electricity Retailers | −0.567 (0.285) | 37.416 (0.576) | −2.069 | −2.689 *** (0.003) | 47.788 (0.481) | −2.624 | −15.921 *** (0.000) | 145.572 *** (0.000) | −3.800 *** | −1.148 (0.000) | 56.855 *** (0.000) | −3.938 *** |
Basic Model | Competition Model | |||
---|---|---|---|---|
Statistic | p-Value | Statistic | p-Value | |
Modified Dickey-Fuller-t | −1.0789 | 0.1403 | −0.1684 | 0.4331 |
Dickey-Fuller-t | −2.0437 | 0.0205 | −1.6596 | 0.0485 |
Augmented Dickey-Fuller-t | −0.5699 | 0.2844 | −0.9023 | 0.1834 |
Unadjusted modified Dickey-Fuller-t | −2.7615 | 0.0029 | −1.9163 | 0.0277 |
Unadjusted Dickey-Fuller-t | −2.9947 | 0.0014 | −2.7776 | 0.0027 |
Basic Model | Competition Model | |||
---|---|---|---|---|
Statistic | p-Value | Statistic | p-Value | |
Modified Phillips-Perron-t | 5.6727 | 0.0000 | 3.7857 | 0.0001 |
Phillips-Perron-t | −13.1729 | 0.0000 | −8.0833 | 0.0000 |
Augmented Dickey-Fuller-t | −22.1789 | 0.0000 | −17.6723 | 0.0000 |
Basic Model | Competition Model | |||
---|---|---|---|---|
Statistic | p-Value | Statistic | p-Value | |
Breusch-Pagan Heteroskedasticity test | 21.08 | 0.0000 | 30.81 | 0.0000 |
Glejser Heteroskedasticity test | 8.83 | 0.0000 | 17.56 | 0.0000 |
Harvey Heteroskedasticity test | 1.50 | 0.1753 | 5.47 | 0.0001 |
White Heteroskedasticity test | 4.46 | 0.0121 | 0.23 | 0.7924 |
Breusch-Godfrey/Wooldridge Serial Correlation test | 242.43 | 0.0000 | 218.68 | 0.0000 |
Static-Analysis | Dynamic-Analysis | |||
---|---|---|---|---|
Basic Model | Competition Model | Basic Model | Competition Model | |
Variable | Fixed Effects Driskoll-Kraay (S.E) | Fixed Effects Driskoll-Kraay (S.E) | System-GMM (2-Steps) | System-GMM (2-Steps) |
Electricity Price(t-1) | - | - | 0.8681 *** (0.000) | 0.8283 *** (0.000) |
Renewables | 1.8428 *** (0.000) | - | −0.1957 *** (0.005) | - |
Renewables 2 | −0.0187 *** (0.000) | - | - | - |
ElectricityGFCF | 8.2735 *** (0.000) | - | 6.7119 *** (0.003) | - |
Environmental Tax | 0.6855 *** (0.010) | - | 0.1379 * (0.100) | - |
Economic Globalization | 0.5963 ** (0.040) | - | 1.2539 ** (0.016) | - |
Market Share | - | −0.4851 *** (0.004) | - | −0.1612 * (0.067) |
Secondary Autoproducers | - | 5.4711 *** (0.000) | - | 1.9501 ** (0.044) |
Main Electricity Retailers | - | 0.3583 (0.746) | - | −0.7942 * (0.059) |
Total Electricity Retailers | - | −0.0432 *** (0.004) | - | −0.0207 *** (0.002) |
Constant | - | 131.0176 *** (0.000) | - | 31.3733 *** (0.000) |
Observations | 442 | 390 | 416 | 369 |
AR(1) (p-Value) | - | - | 0.001 | 0.000 |
AR(2) (p-Value) | - | - | 0.619 | 0.839 |
Number of instruments | - | - | 21 | 24 |
Sargan test (p-Value) | - | - | 0.291 | 0.490 |
Hansen-J test (p-Value) | - | - | 0.605 | 0.384 |
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Halkos, G.E.; Tsirivis, A.S. Electricity Prices in the European Union Region: The Role of Renewable Energy Sources, Key Economic Factors and Market Liberalization. Energies 2023, 16, 2540. https://doi.org/10.3390/en16062540
Halkos GE, Tsirivis AS. Electricity Prices in the European Union Region: The Role of Renewable Energy Sources, Key Economic Factors and Market Liberalization. Energies. 2023; 16(6):2540. https://doi.org/10.3390/en16062540
Chicago/Turabian StyleHalkos, George E., and Apostolos S. Tsirivis. 2023. "Electricity Prices in the European Union Region: The Role of Renewable Energy Sources, Key Economic Factors and Market Liberalization" Energies 16, no. 6: 2540. https://doi.org/10.3390/en16062540