Are Fundamentals Enough? Explaining Price Variations in the German Day-Ahead and Intraday Power Market

Posted: 14 Apr 2015 Last revised: 22 Apr 2016

See all articles by Christian Pape

Christian Pape

University of Duisburg-Essen - University of Duisburg-Essen, Students

Simon Hagemann

Vattenfall Europe AG

Christoph Weber

University of Duisburg-Essen

Date Written: March 1, 2015

Abstract

European electricity market participants are encouraged to balance intraday deviations from their day-ahead schedules via trades in the intraday market. Together with the increasing production of variable renewable energy sources (RES), the intraday market is gaining importance. We investigate the explanatory power of a fundamental modeling approach explicitly accounting for must-run operations of combined heat and power plants (CHP) and intraday peculiarities such as a shortened intraday supply stack. The fundamental equilibria between every hour's supply stack and aggregated demand in 2012 and 2013 are modeled to yield hourly price estimates. The major benefits of a fundamental modeling approach are the ability to account for non-linearities in the supply stack and the ability to combine time-varying information consistently. The empirical results show that fundamental modeling explains a considerable share of spot price variance. However, differences between the fundamental and actual prices persist and are explored using regression models. The main differences can be attributed to (avoided) start up-costs, market states and trading behavior.

Keywords: Intraday market for electricity, fundamental price modeling

JEL Classification: Q41

Suggested Citation

Pape, Christian and Hagemann, Simon and Weber, Christoph, Are Fundamentals Enough? Explaining Price Variations in the German Day-Ahead and Intraday Power Market (March 1, 2015). Energy Economics, Volume 54, February 2016, Pages 376-387, Available at SSRN: https://ssrn.com/abstract=2593754

Christian Pape (Contact Author)

University of Duisburg-Essen - University of Duisburg-Essen, Students ( email )

Germany

Simon Hagemann

Vattenfall Europe AG ( email )

Überseering 12
Hamburg, 22297
Germany

Christoph Weber

University of Duisburg-Essen ( email )

Universitätsstraße 2
Essen, 45141
Germany

HOME PAGE: http://www.ewl.wiwi.uni-due.de

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