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Electricity markets regulations: the financial impact of the global energy crisis

I. Segarra, C. Atanasova, I. Figuerola-Ferretti Garrigues

Journal of International Financial Markets, Institutions and Money Vol. 93, pp. 102008-1 - 102008-15


Amid the global energy crisis, we examine the impact of electricity market regulations in the European Union (EU). Pursuing an integrated EU electricity market inadvertently heightened the interdependence between gas and electricity prices. The EU energy crisis, triggered by the gas supply shock, amplified power prices and their volatility. These volatility spikes led to substantial margin increases on power futures contracts crucial for mitigating electricity price risks. The increase in margins placed a substantial financial burden on EU power utilities. We document an almost eight-fold surge in required collateral for long positions in front-month EU power futures contracts during the one-year duration of the crisis. Throughout the crisis, EU utilities experienced lower sales and profitability compared to their US counterparts, and a portfolio of EU power utilities significantly underperformed a counterfactual portfolio of US power utilities.

Spanish layman's summary:

La crisis de energía de la UE intensificó la interdependencia entre gas y electricidad. Los precios se elevaron tras el shock en el suministro de gas, afectando a las empresas. El colateral aumentó considerablemente. Las empresas de la UE tuvieron ventas y rentabilidad menores que las de EE. UU.

English layman's summary:

EU's energy crisis heightened gas-electricity price interdependence. Triggered by gas supply shock, power prices surged, burdening utilities. Collateral surged nearly eight-fold. EU utilities faced lower sales, profitability than US counterparts, underperforming significantly.

Keywords: Electricity markets regulations; Zonal vs nodal pricing; Margins; Synthetic controls; Financial performance

JCR Impact Factor and WoS quartile: 4,000 - Q1 (2022)

DOI reference: DOI icon https://doi.org/10.1016/j.intfin.2024.102008

Published on paper: June 2024.

Published on-line: May 2024.

I. Segarra, C. Atanasova, I. Figuerola-Ferretti Garrigues, Electricity markets regulations: the financial impact of the global energy crisis. Journal of International Financial Markets, Institutions and Money. Vol. 93, pp. 102008-1 - 102008-15, June 2024. [Online: May 2024]

    Research topics:
  • Energy markets design and regulation
  • Long-term energy scenarios : Long-term energy scenarios
  • Analysis of sustainable energy policies
  • Regulation of energy network infrastructures: Transport and distribution

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