Impact of Wind and Solar Production on Electricity Prices: Quantile Regression Approach

Abstract

We study the impact of fuel prices, emission allowances, demand, past prices, wind and solar production on hourly day-ahead electricity prices in Germany over the period from January 2015 until June 2018. Working within a linear regression, ARX-EGARCH and quantile regression framework we compare how different pricing factors influence the mean and quantiles of the electricity prices. Contrary to the existing literature we find that short-term price fluctuations on the fuel markets and emission allowances have little effect on the electricity prices. We also find that dayof-the-week as well as monthly effects have significant impact on the electricity prices in Germany and should not be ignored in model specifications. Three main factors are found to drive extreme prices: price persistence, expected demand and expected wind production. Our findings contribute to understanding of extreme price movements, which can be used in pricing models and hedging strategies.

Willingness-to-pay experimental model for Stackelberg dual channel pricing decision

“…Meanwhile, some studies (see Gupta and Çakanyıldırım, 2016) have derived a customer WTP-choice model and empirically verified that the WTP-choice model can be a legitimate alternative to the commonly used logit models for expressing channel preference of consumers. These empirical or experimental studies usually formulate price as a continuous independent variable to better describe the relationship between price and customer behavior (Do et al, 2019). Even though empirical models can better describe the effects of price on consumers' decisions, in the absence of a systematic approach toward examining the effect of a different combination of prices on demand, models constructed using secondary data obtained from the market or by survey studies may not be reliable.…”

“…Meanwhile, some studies (see Gupta and Çakanyıldırım, 2016) have derived a customer WTP-choice model and empirically verified that the WTP-choice model can be a legitimate alternative to the commonly used logit models for expressing channel preference of consumers. These empirical or experimental studies usually formulate price as a continuous independent variable to better describe the relationship between price and customer behavior (Do et al. , 2019).…”