An Econometric Model for Intraday Electricity Trading

Philosophical Transactions of the Royal Society A, 379(2202):20190624, 2021

27 Pages Posted: 31 Dec 2019 Last revised: 17 Sep 2021

See all articles by Marcel Kremer

Marcel Kremer

University of Duisburg-Essen

Ruediger Kiesel

University of Duisburg-Essen - Faculty of Economic Science

Florentina Paraschiv

Zeppelin University, Chair of Finance; Norwegian University of Science and Technology, Faculty of Economics and Management, NTNU Business School; University of St. Gallen, Institute for Operations Research and Computational Finance

Date Written: September 17, 2021

Abstract

This paper develops an econometric price model with fundamental impacts for intraday electricity markets of 15-minute contracts. A unique data set of intradaily updated forecasts of renewable power generation is analyzed. We use a threshold regression model to examine how 15-minute intraday trading depends on the slope of the merit order curve. Our estimation results reveal strong evidence of mean reversion in the price formation mechanism of 15-minute contracts. Additionally, prices of neighboring contracts exhibit strong explanatory power and a positive impact on prices of a given contract. We observe an asymmetric effect of renewable forecast changes on intraday prices depending on the merit-order-curve slope. In general, renewable forecasts have a higher explanatory power at noon than in the morning and evening, but price information is the main driver of 15-minute intraday trading. Overall, we show that the importance of influencing factors on the intraday electricity market has changed from fundamental towards trading-related factors. This novel finding illustrates that the intraday electricity market has become increasingly mature.

Keywords: Intraday electricity market; Econometric modeling; 15-minute contracts; Renewable power forecasts; Merit order curve; Threshold regression

JEL Classification: C22; C24; C55; G10; Q20; Q21; Q40; Q41; Q42

Suggested Citation

Kremer, Marcel and Kiesel, Ruediger and Paraschiv, Florentina, An Econometric Model for Intraday Electricity Trading (September 17, 2021). Philosophical Transactions of the Royal Society A, 379(2202):20190624, 2021, Available at SSRN: https://ssrn.com/abstract=3489214 or http://dx.doi.org/10.2139/ssrn.3489214

Marcel Kremer (Contact Author)

University of Duisburg-Essen ( email )

Universitaetsstrasse 12
Essen, 45141
Germany

HOME PAGE: http://www.lef.wiwi.uni-due.de/en/team/marcel-kremer/

Ruediger Kiesel

University of Duisburg-Essen - Faculty of Economic Science ( email )

Essen, 45117
Germany

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

Florentina Paraschiv

Zeppelin University, Chair of Finance ( email )

Am Seemooser Horn 20
Friedrichshafen, 88045
Germany

Norwegian University of Science and Technology, Faculty of Economics and Management, NTNU Business School ( email )

Klæbuveien 72
Trondheim, NO-7030
Norway

University of St. Gallen, Institute for Operations Research and Computational Finance ( email )

Bodanstrasse 6
St. Gallen, 9000
Switzerland

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