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The impacts of variable renewable production and market coupling on the convergence of French and German electricity prices

Author

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  • Jan Horst Keppler

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Yannick Le Pen

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Sébastien Phan

Abstract

As speculative flows into commodity futures are expected to link commodity prices more strongly to equity indices, we investigate whether this process also creates increased correlations amongst the commodities themselves. Considering U.S. oil and gas futures, we investigate whether common factors, derived from a large international data set of real and nominal macroeconomic variables by means of the large approximate factor models methodology, are able to explain both returns and whether, beyond these fundamental common factors, the residuals remain correlated. We further investigate a possible explanation for this residual correlation by using some proxies for trading intensity derived from CFTC publicly available data, showing most notably that the proxy for speculation in the oil market increases the oil-gas correlation. We thus identify the central role of financial activities in shaping the link between oil and gas returns.

Suggested Citation

  • Jan Horst Keppler & Yannick Le Pen & Sébastien Phan, 2016. "The impacts of variable renewable production and market coupling on the convergence of French and German electricity prices," Post-Print hal-01609447, HAL.
  • Handle: RePEc:hal:journl:hal-01609447
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01609447
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    References listed on IDEAS

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    Cited by:

    1. Rinne, Sonja, 2018. "Radioinactive: Are nuclear power plant outages in France contagious to the German electricity price?," CIW Discussion Papers 3/2018, University of Münster, Center for Interdisciplinary Economics (CIW).
    2. Klaus Gugler & Adhurim Haxhimusa & Mario Liebensteiner, 2016. "Integration and Efficiency of European Electricity Markets: Evidence from Spot Prices," Department of Economics Working Papers wuwp226, Vienna University of Economics and Business, Department of Economics.
    3. Sébastien Phan & Fabien Roques, 2015. "Is the depressive effect of renewables on power prices contagious? A cross border econometric analysis," Cambridge Working Papers in Economics 1527, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    electricity price convergence; renewable energies; intermittency; market coupling; France; Germany;

    JEL classification:

    • F0 - International Economics - - General

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