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Market Integration, Efficiency and Interconnectors : The Irish Single Electricity Market / Rabindra Nepal and Tooraj Jamasb. cambridge : Electricity Policy Research Group,  2011, 29 p. (working paper ; 1121)http://www.eprg.group.cam.ac.uk/wp-content/uploads/2011/07/EPRG-1121_complete.pdfAbstract: Interconnections can be an effective way to increase competition in  wholesale electricity markets in particular for smaller markets with few  actors. This paper quantitatively examines the potentials for  interconnections in the Irish Single Electricity Market (SEM). We use a  time-varying Kalman filter technique to assess the degree of market  integration between SEM and other large, mature and interconnected  wholesale electricity markets in Europe. The results indicate a low  degree of market integration between SEM and other European markets and  thereby raising the possibility to benefit from increased electricity  trade. As wholesale prices in SEM remain relatively high and volatile; a  larger interconnector capacity can promote competition, close the gap  with the European wholesale prices, improve security of supply, and  mitigate price volatility. The results indicate that wholesale spot  trading of renewable may not increase market integration. The results  suggest that an interconnector capacity amounting to about 21% of  generation capacity in SEM is likely to achieve an integration  coefficient of 0.86 similar to what currently exists between the markets  in Austria and the Netherlands. 