Why (and how) to regulate Power Exchanges in the EU market integration context?

Abstract

Power Exchanges (PXs) are key market institutions in open and market-based electricity industries. This paper aims at contributing to the ongoing debate on why and how to regulate Power Exchanges in the EU market integration context. The paper starts by stating that two different types of PXs have to be distinguished, i.e. “Merchant” PXs and the “Cost of Service Regulated” PXs. The paper continues by comparing the typical incentives of these two types of PXs to perform the basic PX tasks in an isolated national market and in a market integration context. The paper concludes by deriving from this analytical frame the most relevant regulatory actions.