Efficient electricity markets

This paper aims to motivate competition versus traditional organization of electricity industry, in term of efficient markets theory. Efficient markets theory has been called to justify that in developed electricity markets that have good regulation, market makers and enough transparency, depth and liquidity, prices reflect the fair value of the good. Descriptive and technical analyses applied to European electricity market prices strengthen our enthusiasm about efficient markets theory and about the fact that market prices should be preferred to regulated prices. The paper underlies the role that regulation could play in every market and particularly in electricity markets. We motivate this element in terms of behavioral finance and human psychology.