Hooking national power grids together actually makes electricity markets less flexible and more prone to price jumps.
March 19, 2026
Original Paper
How Energy System Developments Affect Elasticities in Day-Ahead Electricity Markets: Evidence from Bid Curves
SSRN · 6435080
The Takeaway
Policy-makers assume that 'integration' and green energy expansion create more flexible markets, but the data reveals the opposite: as grids become more integrated, the 'elasticity' (flexibility) of both demand and supply has actually decreased. This means the market is becoming less capable of absorbing price volatility despite being more interconnected.
From the abstract
Since the liberalization of European electricity markets in the late 1990s, many aspects of the energy landscape have changed significantly. In this study, we investigate how the day-ahead electricity market has developed over time, and how these changes can be attributed to the growth of renewable generation, changes in fossil fuel prices and increased international integration. We do this using a rich dataset from the European Power Exchange, containing data on hourly bids that were submitted