Does energy integrate?

Amidst the international movement to privatize and deregulate electricity and gas sectors of economies, the question of the integration of those sectors has been somewhat underestimated. In fact, the integration of energy markets across boundaries is occurring. We examine this process in three regions: Europe, Central America, and South America. We analyze the forces driving integration in each area, and estimate the prospects for progress. We take a close look at Nordpool, which is now the most integrated market in the world, to see if it can serve as a model for other regions. We close with a set of conditions that we suggest are necessary for a successful international integration of energy markets.