ACER-CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2018

In 2018, annual average day-ahead (DA) electricity prices increased in all bidding zones, except in Romania. The highest annual average DA prices were observed in the British, Italian, Irish (Single Energy Market, SEM), Greek and Iberian markets, whereas the lowest annual average DA prices were recorded in the Bulgarian, Nordic and German markets. The number of price spikes (200) significantly decreased in 2018 compared to the previous two years (more than 1,000 each year). The significant drop in the number of DA price spikes across the EU is partly the result of mild weather conditions, which smoothened the load and therefore diminished the frequency of scarcity in most Member States (MSs) in 2018. Future situations of scarcity are likely to result in the reappearance of more frequent price spikes. In the absence of market power or price manipulation, price spikes may be a sign of well-functioning markets and tend to reduce the need for implementing capacity mechanisms (CM), possibly categorised as state aid, to the benefit of end consumers.

Although price convergence is not an objective as such, it provides an indication of the level of electricity market integration. In 2018, different levels of price convergence persisted across Europe. Average absolute DA price spreads ranged from less than 0.5 euro/MWh on the borders between Estonia and Finland, Portugal and Spain, and Latvia and Lithuania, to 10 euros/MWh or more on several borders, e.g. on all Bulgarian and British borders, or on the border between Austria and Italy (see Table i). The persistent price differentials confirm how relevant it is to complete market coupling on all borders and to maximise the amount of cross-zonal capacity made available for trade, particularly on borders with the highest price spreads.