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German nuclear power plant closures and the integration of electricity markets in Europe

How does the actions of one European electricity market participant affect other markets within the region? This study looks at what impact Germany's decision to cancel and close its nuclear power stations may have had on neighbouring markets, and what lessons can be learned from it for those seeking pan-European market integration.

Author(s): Professor Lilian De Menezes - Cass Business School; Melanie Houllier - Cass Business School

The primary goals of European energy policy are security of supply, affordability and reducing climate change. The formation of an integrated electricity market is seen as one means of meeting these objectives. However, national policies that can affect wholesale prices in one electricity market can have an impact on this integration.

In 2011, in the wake of the Fukushima Nuclear Disaster, Germany announced it would commence the closure of all its nuclear power stations, with the final one to be closed by 2022. This paper examines market integration before and after the closure of 8 of Germany's nuclear power stations that occurred over a few months following the 2011 announcement. These closures altered the German electricity mix significantly, with wind power in particular seeing a considerable increase in share. The possibility that unilateral action such as that taken by Germany could also alter the mix in interconnected electricity markets forms the basis of this study.

This paper highlights the challenges that isolated energy policies pose to the aim of achieving a single European electricity market. It recommends a Europe-wide capacity assessment of national policies. This would allow each market to estimate the consequences of their policies in other markets, and anticipate how they themselves would be affected by others. The greater sharing of information between the different market participants, regulators and policy-makers that such an assessment would require could also facilitate the monitoring of dominant participant behaviour and help in removing barriers to full market coupling. It could clear the way to an integrated Europrean energy market.

A draft version of the research paper is available for download at the link below. The final version was published in ScienceDirect.

Attachment(s)
{Germany's nuclear power plant closures and the integration of electricity markets in Europe}{https://www.cass.city.ac.uk/__data/assets/pdf_file/0019/360451/germany-nuclear-plant-closure-integration-electricity-markets.pdf}
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