The convergence of electricity prices in Europe

Abstract

The ambition to create a single European market for electricity has been explicit since the Single European Act of 1988. This article investigates the degree to which this goal has been achieved in terms of the convergence of electricity prices. Two commonly used tests of convergence are applied, β-convergence and a cointegration test using annual electricity price data for nine European Union member states from 1978 to 2003. The results suggest that convergence did occur for most of the countries in the sample over this period.