Gains from Trade in Global Electricity Markets

The paper presented in this Decarbonization Seminar starts with rudimentary price theory predictions for consumer welfare gains from new technologies that improve the efficiency of goods trade. Micro-data on over 140 million of bids from electricity markets in California, Nordics, and Spain reveals that the consumer surplus gain from efficiency improvements follows a markedly different pattern in the three markets. Consistent with the theory, the results can be explained by structural differences in excess demand that arise from institutional and technological determinants. The welfare mechanism is important to policies on new technologies, and also to understand the implications of technologies that introduce arbitrage between electricity markets.