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The Merit-Order Effect on the Swedish bidding zone with the highest electricity flow in the Elspot market

Author

Listed:
  • Daniela Pereira Macedo

    (UBI - University of Beira Interior [Portugal])

  • António Cardoso Marques

    (UBI - University of Beira Interior [Portugal])

  • Olivier Damette

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEC - Chaire Economie du Climat - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

Abstract

Electricity interconnections have become increasingly common as a means of integrating electricity markets, expediting the exchange of electricity, and thereby creating balanced electricity systems. These interconnections also facilitate the incorporation of intermittent renewable energy sources, ensuring greater energy security and reliability in electricity markets. In this study, an assessment is made of the impact of both electricity produced from wind power, and the cross-border flow of electricity, on the mean and volatility of the day-ahead electricity price. To do this, we studied the Swedish bidding zone with the highest flow of electricity imports and exports between 2016 and 2019 - the SE3 bidding zone (BZ). Using a SARMAX/GARCH approach, every hour of the day was assessed individually, by estimating up to 24 different models from 1 January 2016 to 30 April 2020. The results confirm the Merit-Order Effect from wind power, and that its impact is similar in magnitude throughout the day. Furthermore, the flow of electricity from both import and export appear to increase the day-ahead electricity price. This study also suggests that the volatility of electricity prices is primarily increased by unexpected shocks. This may be related to the high dependence of the SE3 BZ electricity system on electricity imports, which makes the system extremely susceptible to larger transmission of shocks.

Suggested Citation

  • Daniela Pereira Macedo & António Cardoso Marques & Olivier Damette, 2021. "The Merit-Order Effect on the Swedish bidding zone with the highest electricity flow in the Elspot market," Post-Print hal-03726391, HAL.
    • Handle: RePEc:hal:journl:hal-03726391
    DOI: 10.1016/j.eneco.2021.105465
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    Cited by:

    1. Jain, Sourabh & Shrimali, Gireesh, 2022. "Impact of renewable electricity on utility finances: Assessing merit order effect for an Indian utility," Energy Policy, Elsevier, vol. 168(C).
    2. De Blauwe, Jilles & Deissenroth-Uhrig, Marc & Mantke, Henrik & Keles, Dogan, 2025. "Cross-border effects on electricity spot prices - a meta-study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 224(C).
    3. Michail I. Seitaridis & Nikolaos S. Thomaidis & Pandelis N. Biskas, 2021. "Fundamental Responsiveness in European Electricity Prices," Energies, MDPI, vol. 14(22), pages 1-14, November.
    4. Rinne, Sonja, 2024. "Estimating the merit-order effect using coarsened exact matching: Reconciling theory with the empirical results to improve policy implications," Energy Policy, Elsevier, vol. 185(C).
    5. Levitt, Clinton J. & Lovell, Skylar, 2025. "Market share, plant ownership, and the merit-order effect of renewable resources: Evidence from Australia’s National Electricity Market," Utilities Policy, Elsevier, vol. 96(C).
    6. Gloria Durán-Castillo & Tim Weis & Andrew Leach & Brian A. Fleck, 2025. "Toward Sustainable Electricity Markets: Merit-Order Dynamics on Photovoltaic Energy Price Duck Curve and Emissions Displacement," Sustainability, MDPI, vol. 17(10), pages 1-28, May.
    7. Mahmood Hosseini Imani & Ettore Bompard & Pietro Colella & Tao Huang, 2021. "Impact of Wind and Solar Generation on the Italian Zonal Electricity Price," Energies, MDPI, vol. 14(18), pages 1-26, September.
    8. Sonnsjö, Hannes, 2024. "What we talk about when we talk about electricity: A thematic analysis of recent political debates on Swedish electricity supply," Energy Policy, Elsevier, vol. 187(C).

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