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The case of negative day-ahead electricity prices

Author

Listed:
  • Fanone, Enzo
  • Gamba, Andrea
  • Prokopczuk, Marcel

Abstract

In recent years, Germany has significantly increased its share of electricity produced from renewable sources, which is mainly due to the Renewable Energy Act (EEG). The EEG substantially impacts the dynamics of intra-day electricity prices by increasing the likelihood of negative prices. In this paper, we present a non-Gaussian process to model German intra-day electricity prices and propose an estimation procedure for this model. Most importantly, our model is able to generate extreme positive and negative spikes. A simulation study demonstrates the ability of our model to capture the characteristics of the data.

Suggested Citation

  • Fanone, Enzo & Gamba, Andrea & Prokopczuk, Marcel, 2013. "The case of negative day-ahead electricity prices," Energy Economics, Elsevier, vol. 35(C), pages 22-34.
  • Handle: RePEc:eee:eneeco:v:35:y:2013:i:c:p:22-34
    DOI: 10.1016/j.eneco.2011.12.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Electricity; Lévy processes; Price spikes; Negative prices; Fractional integration;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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