The role of electricity trading and power exchanges for the construction of a common European electricity market

The development of electricity trading and the creation of electricity power exchanges are one of the most visible results of the liberalization of the electricity industry in Europe. Following liberalization, the scope of electricity trading and the role of exchanges have still yet to be clearly identified. This paper examines the nature of electricity trading in Europe. First, it discusses the development of electricity trading. Second, the development of power exchanges and the level of market integration are analyzed. In the end, this paper identifies the main challenges for trading within the European electricity sector and its role in creating a real common market in Europe.