Co-movements within European Electricity Markets: telling our history

This paper provides new insights on the success of the electricity market integration process so far, by analyzing the existence of co-movements between electricity prices of European electricity markets and thus testing the existence of an effective integration. Contrary to what is usually performed in the literature, our approach makes use of the Continuous Wavelet Transform to analyze data in the time-frequency domain. Results suggest that markets reveal high coherence and, as such, a high degree of integration, mainly due to geographic proximity and current market development. Other European markets are still less integrated showing low co-movement among spot electricity prices. Useful insights are derived from the results as to the current state of electricity markets integration.