Revisiting long-run relations in power markets with high RES penetration

Electricity generation from renewable energy resources (RES) has become increasingly significant to reach EU and emissions reduction targets. At the same time, one of the main EU policy goals has been the creation of a common internal energy market for Europe. In this paper, we focus on these two issues previously studied separately, considering their possible interactions. We first analyze the long-run relationship between day-ahead electricity prices and fuel prices (natural gas and coal) looking at two samples of years characterized by low and high RES penetration, then we explore the integration of EU markets. We show that the electricity–fuel nexus found over 2006–2008 changed dramatically over 2010–2014 for the majority of countries considered. In particular, the long-run dependence of electricity from gas and coal prices is much lower in recent years. Furthermore, our results confirm that the considered EU countries are becoming less integrated as RES-E increases. Our findings suggest that nationally implemented policies to support renewables are successful in increasing RES penetration, but they have lessened the linkage among EU markets, then making integration more difficult to obtain.