Analyzing the impact of fossil fuel import reliance on electricity prices: The case of the Iberian Electricity Market. Issue 7 (November 2017)

• Record Type: Journal Article
• Authors: Moreno, Blanca; García-Álvarez, María T
• Is Part Of: Energy & environment. Volume 28:Issue 7(2017)
• Page Start: 687
• Page End: 705
• Publication Date: 2017-11
• Subjects: Electricity market -- European Union Emission Trading System -- Spain -- Portugal -- energy dependence; Power resources -- Environmental aspects -- Periodicals; Power resources -- Periodicals; Renewable energy sources -- Periodicals; Energy policy -- Environmental aspects -- Periodicals; Ressources énergétiques; Politique énergétique; Energy policy -- Environmental aspects; Power resources; Power resources -- Environmental aspects; Renewable energy sources; Periodicals; 333.7
• DOI: 10.1177/0958305X17724047
• Languages: English
• ISSNs: 0958-305X

Abstract

Spain and Portugal are highly dependent on energy from abroad, importing more than 70% of all the energy they consume. This high energy dependence could involve important effects on the level and stability of their electricity prices as a half the gross electricity generated in both countries came from power stations using imported combustible fuels (such as natural gas, coal and oil). In general, changes in the prices of these fossil fuels can directly affect household electricity prices, since generation costs are likely to be transmitted through to the wholesale electricity market. Moreover, in the framework of the European Union Emission Trading System, electricity production technologies tend to incorporate their costs of carbon dioxide emission allowances in sale offers with the consequent increase of the electricity prices. The objective of this paper is to analyze the influence of fossil fuel costs and prices of carbon dioxide emission allowances in the EU on the Spanish and Portuguese electricity prices. With this aim, a maximum entropy econometric approach is used. The obtained results indicate that not only the price of imported gas are very important in explaining Spanish and Portuguese electricity prices but also the price of carbon dioxide emission allowances in the EU.