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Are fundamentals enough? Explaining price variations in the German day-ahead and intraday power market

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  • Pape, Christian
  • Hagemann, Simon
  • Weber, Christoph

Abstract

European electricity market participants are encouraged to balance intraday deviations from their day-ahead schedules via trades in the intraday market. Together with the increasing production of variable renewable energy sources (RES), the intraday market is gaining importance. We investigate the explanatory power of a fundamental modeling approach explicitly accounting for must-run operations of combined heat and power plants (CHP) and intraday peculiarities such as a shortened intraday supply stack. The fundamental equilibria between every hour's supply stack and aggregated demand in 2012 and 2013 are modeled to yield hourly price estimates. The major benefits of a fundamental modeling approach are the ability to account for non-linearities in the supply stack and the ability to combine time-varying information consistently. The empirical results show that fundamental modeling explains a considerable share of spot price variance. However, differences between the fundamental and actual prices persist and are explored using regression models. The main differences can be attributed to (avoided) start up-costs, market states and trading behavior.

Suggested Citation

  • Pape, Christian & Hagemann, Simon & Weber, Christoph, 2016. "Are fundamentals enough? Explaining price variations in the German day-ahead and intraday power market," Energy Economics, Elsevier, vol. 54(C), pages 376-387.
  • Handle: RePEc:eee:eneeco:v:54:y:2016:i:c:p:376-387
    DOI: 10.1016/j.eneco.2015.12.013
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    More about this item

    Keywords

    Intraday market for electricity; Fundamental price modeling;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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