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The Role of Continuous Intraday Electricity Markets: The Integration of Large-Share Wind Power Generation in Denmark

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  • Fatih Karanfil
  • Yuanjing Li

Abstract

This paper suggests an innovative idea to examine the functionality of an intraday electricity market by testing causality among its fundamental components. Using Danish and Nordic data, it investigates the main drivers of the price difference between the intraday and day-ahead markets, and causality between wind forecast errors and their counterparts. Our results show that the wind and conventional generation forecast errors significantly cause the intraday price to differ from the day-ahead price, and that the relative intraday price decreases with the unexpected amount of wind generation. Cross-border electricity exchanges are found to be important to handle wind forecast errors. Additionally, some zonal differences with respect to both causality and impulse responses are detected. This paper provides the first evidence on the persuasive functioning of the intraday market in the case of Denmark, whereby intermittent production deviations are effectively reduced, and wind forecast errors are jointly handled through the responses from demand, conventional generation, and intraday international electricity trade.

Suggested Citation

  • Fatih Karanfil & Yuanjing Li, 2017. "The Role of Continuous Intraday Electricity Markets: The Integration of Large-Share Wind Power Generation in Denmark," The Energy Journal, , vol. 38(2), pages 107-130, March.
    • Handle: RePEc:sae:enejou:v:38:y:2017:i:2:p:107-130
    DOI: 10.5547/01956574.38.2.fkar
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    References listed on IDEAS

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    3. Johannes Mauritzen, 2015. "Now or Later? Trading Wind Power Closer to Real Time And How Poorly Designed Subsidies Lead to Higher Balancing Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    4. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
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