Institutions for European Energy Cooperation : Dyadic Data Analysis of Electricity Network Interconnections

Abstract

Europe is the region that has pursued regional cooperation and integration most enthusiastically. The integration of energy systems is what Europe seeks to have synergistic effects. This study examines European energy cooperation by focusing on the driving factors of electricity network interconnections measured as electricity exchange flows. Considering the socioeconomic conditions and the benefits and costs of electricity system integration, it is puzzling why some countries’ electricity systems have been connected and have significant electricity flows, while others do not. Furthermore, this study asks what political, institutional, and economic drivers influence the different levels of electricity exchange flows between European countries. While extant studies have looked at the dynamics of energy cooperation, studies to understand electricity network cooperation and integration have been rare. To fill this gap, this study explains the variation of exchange flows by analyzing the dyadic data of 41 European countries in 2013. The statistical analysis suggests that the degree of current policy coordination of regional transmission system operator networks is positively associated with the level of current exchange flows. However, not all institutions are effective in increasing electricity flows. This finding implies that the experience of energy cooperation through effective institutions, along with geographic proximity and the economic benefits of trade, increases electricity network interconnections.