Introduction to the special issue “The regional integration of energy markets”
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The spatial organization of the electricity industry is key in the current policy-making debate in many parts of the world. This concern results from a combination of policy and technological considerations. Policy-wise, the drives towards market integration and towards increased penetration of renewable energy sources are possibly the two most prominent on-going industry transformations. Technology-wise, the transition to a decentralized regime is triggered by the introduction of combined-cycle gas turbines and further pushed by the development and diffusion of renewables. Motivated by the relevance of geography in shaping the regulatory approaches to the electricity industry, we have collected articles that deal with the regional integration of electricity markets and the related policy-making issues. After reviewing the main motivations behind market integration policies, in this short essay we discuss some critical issues in policy design, involving spatial patterns in electricity production, the exercise of market power across transmission bottlenecks, and the associated distributional issues. The last section offers a summary of the articles appearing in the special issue, along with a sketch of their main implications for energy policy.