The Evolution of Electricity Prices in The EU since the Single European Act

Abstract

The development of a single European market for electricity has been a goal of EU policy makers since the Single European Act of 1986. This paper considers the impact of EU Directives on the evolution of electricity prices. Three empirical tests for convergence are applied to prices for ten EU countries; a simple test for ß-convergence; a cointegration test; and Nahar and Inder's (2002) test. Although mixed, the results suggest that convergence did occur for most of the countries in the sample over this period.