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Cross-Border Effects on Swiss Electricity Prices in the Light of the Energy Transition

Author

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  • Karl Frauendorfer

    (Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstrasse 6, 9000 St. Gallen, Switzerland)

  • Florentina Paraschiv

    (Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstrasse 6, 9000 St. Gallen, Switzerland
    NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

  • Michael Schürle

    (Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstrasse 6, 9000 St. Gallen, Switzerland)

Abstract

Given the perspective of the Swiss energy policy to support investments in renewable energy sources, it becomes highly relevant at this point to understand cross-border effects of imported electricity on the Swiss electricity prices. We found that German (Phelix) and Swiss (Swissix) electricity prices are cointegrated, given that the two markets are interconnected. We examined the cross-border effects of the German market fundamentals on Swissix, taking into account seasonality aspects. In the context of a dynamic fundamental model, we found that there is a continuous adaption process of electricity prices to market fundamentals and that this effect depends on the season of the year and the time of the day. Model results reveal the substitution effect between traditional fuels and renewable energies due to their alternative use in production and the shift in the merit order curve. Results are of great relevance to Swiss policy makers: Switzerland imports lower electricity prices due to the energy transition in Germany. In particular, because of the high infeed of PV (photovoltaic) during peak hours, the spread between Swissix peak and off-peak prices narrowed significantly over time. Incentives for investments in renewable energies in Switzerland as well as subsidies for hydropower should be considered in the light of these insights.

Suggested Citation

  • Karl Frauendorfer & Florentina Paraschiv & Michael Schürle, 2018. "Cross-Border Effects on Swiss Electricity Prices in the Light of the Energy Transition," Energies, MDPI, vol. 11(9), pages 1-30, August.
  • Handle: RePEc:gam:jeners:v:11:y:2018:i:9:p:2188-:d:165027
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    References listed on IDEAS

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    1. Paraschiv, Florentina, 2013. "Price Dynamics in Electricity Markets," Working Papers on Finance 1314, University of St. Gallen, School of Finance.
    2. Florentina Paraschiv, 2013. "Price Dynamics in Electricity Markets," International Series in Operations Research & Management Science, in: Raimund M. Kovacevic & Georg Ch. Pflug & Maria Teresa Vespucci (ed.), Handbook of Risk Management in Energy Production and Trading, edition 127, chapter 0, pages 47-69, Springer.
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    Cited by:

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    4. Ozan Korkmaz & Bihrat Önöz, 2022. "Modelling the Potential Impacts of Nuclear Energy and Renewables in the Turkish Energy System," Energies, MDPI, vol. 15(4), pages 1-25, February.

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