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Several empirical studies show that renewable energy sources such as wind and solar power, typically supplied at low marginal cost, can cause electricity market prices to fall. Recent theoretical research and simulations also highlight the link between the integration of renewable energy and market performance in an oligopolistic energy market. This article looks at these dynamics in the context of cross-border effects between two highly interconnected electricity markets, France and Germany. Using a rich panel dataset for hourly data from November 2009 to July 2015 and an empirical model developed in New Empirical Industrial Organization (NEIO) in a dynamic framework, we estimate the impact of German wind and solar power production on both prices and market power in the French wholesale market. The findings highlight the importance of coordinating energy policies via joint renewable energy support schemes among interconnected European electricity markets.
