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An Empirical Analysis of the Bid-ask Spread in the Continuous Intraday Trading of the German Power Market

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  • Clara Balardy

Abstract

Liquidity is decisive for a well-functioning market. As most of the literature on the subject is based on financial markets, the extrapolation of its insights to the power market is fragile. This paper shows the specificities of liquidity of the German power market. Using the bid-ask spread as a proxy, thanks to the detailed order book for the hourly contracts, I first describe the evolution of the liquidity over the trading session. The bid-ask spread has a “L-shaped†pattern over it. Second,I identify the four main drivers of the bid-ask spread: the volatility, the adjustments’ need (forecast errors), the activity and the concentration of the market. I find that an increase of the volatility or the market concentration increases the bid-ask spread while an increase of the adjustments’ need or the market activity decreases it.

Suggested Citation

  • Clara Balardy, 2022. "An Empirical Analysis of the Bid-ask Spread in the Continuous Intraday Trading of the German Power Market," The Energy Journal, , vol. 43(3), pages 229-256, May.
    • Handle: RePEc:sae:enejou:v:43:y:2022:i:3:p:229-256
    DOI: 10.5547/01956574.43.3.cbal
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    References listed on IDEAS

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    1. Simon Hagemann & Christoph Weber, 2013. "An Empirical Analysis of Liquidity and its Determinants in The German Intraday Market for Electricity," EWL Working Papers 1317, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2013.
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    3. Doojin Ryu, 2011. "Intraday price formation and bid–ask spread components: A new approach using a cross‐market model," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(12), pages 1142-1169, December.
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    5. Karsten Neuhoff & Nolan Ritter & Aymen SalahAbou-El-Enien & Philippe Vassilopoulos, 2016. "Intraday Markets for Power: Discretizing the Continuous Trading?," Working Papers EPRG 1609, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Weber, Christoph, 2010. "Adequate intraday market design to enable the integration of wind energy into the European power systems," Energy Policy, Elsevier, vol. 38(7), pages 3155-3163, July.
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    Cited by:

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    3. Enzo Cogn'eville & Thomas Deschatre & Xavier Warin, 2024. "Battery valuation on electricity intraday markets with liquidity costs," Papers 2412.15959, arXiv.org.

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