Regional Electricity Trade in South East Europe – Findings from a Panel Structural Gravity Model
Regional Electricity Trade in South East Europe – Findings from a Panel Structural Gravity Model

Summary/Abstract: The paper discusses whether the electricity trade in South East Europe in 1990-2019 is driven by fundamentals or, like other commodities, one could argue for a speculative movement of electricity flows motivated by factors such as prices. We employ a panel structural gravity model on the example of Bulgaria, Romania, Serbia, Republic of North Macedonia, Greece, Turkey, and Hungary to study the dependence between net exports, generation, and consumption of electricity, as well as the regulations in the field of exporting electricity. We find that domestic consumption of electricity is a much stronger factor than the generation when considering foreign trade in electricity. The construction of power capacity in the countries considered is much more oriented towards the domestic market, which results in an underdeveloped interconnection between them. This is a serious obstacle to the liberalization on the electricity market in the region and its integration into pan-European market structures. It also creates conditions for maintaining higher and volatile electricity prices and, consequently, negatively affects economic development.

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