The plunge in German electricity futures prices – Analysis using a parsimonious fundamental model

Kallabis, Thomas; Pape, Christian; Weber, Christoph

doi:10.1016/j.enpol.2016.04.025

Cited by 50 publications

(45 citation statements)

References 27 publications

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“…2 IB quantities are thus not the quantities spilled into the IBM but synonymous to the actually realized production. 3 As indicated in Kallabis et al (2016) or Beran et al (2017) 5,% is a model output in the kind of fundamental model applied here.…”

Section: (2-2)mentioning

confidence: 99%

“…Doing so, the article suggests to adjust the market value factor metric and to consider selfcurtailment during times of oversupply in the system. The methodological contribution is twofold: First, the article combines and further develops a parsimonious fundamental model to accurately model the price level (Kallabis et al, 2016) and an approach to account for the peculiarities of the IDM (Pape et al, 2016), i.e. notably reflecting shorter lead times and inflexibilities in the conventional power production.…”

Section: Introductionmentioning

confidence: 99%

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The impact of intraday markets on the market value of flexibility — Decomposing effects on profile and the imbalance costs

Pape

2018

Energy Economics

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An increasing share of variable renewable energy sources (VREs) basically affects the electricity price formation in two ways: (1) The so-called merit order effect tends to lower the base price level and challenges conventional plants to remain profitable. (2) Due to the variable nature of renewable energy infeed, the shortterm demand for flexibility increases and changes the volatility of electricity prices. The more variable prices offer opportunities for controllable electricity producers (CEPs) to provide up-and down-ramping flexibility to increase their revenues. In contrast, the VREs with high degrees of simultaneity tend to pay for this flexibility in the electricity spot market to reduce their imbalance exposure. The intraday market (IDM) for electricity has gained importance for the market value of different technologies lately and continues to expand due to the increasing efforts to balance within-day deviation from day-ahead schedules. This article presents a combination and extension of two existing models to capture the peculiarities of the intraday price formation and to analyse the impact of the IDM on the market value of VREs and CEPs. Doing so, the paper suggests an adjustment of the classical market value factor metric and to go beyond classical day-ahead market (DAM) information. The article shows that market value factors (MVFs) can be stabilized if the IDM delivers 'marketbased' price signals for the costs of flexibility, that are sufficient to activate flexibilities prior to the usually more expensive imbalance mechanism (IBM). Yet, the MVFs from single VRE technologies will worsen if their market share is high enough to outweigh forecast errors from other technologies and if they become a permanent price maker in the IDM and the IBM.

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Section: (2-2)mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The impact of intraday markets on the market value of flexibility — Decomposing effects on profile and the imbalance costs

Pape

2018

Energy Economics

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“…For this reason, electricity futures trading is more extensive than spot trading. There are also many studies concerning the electricity futures market (e.g., [5][6][7][8]).…”

Section: Introductionmentioning

confidence: 99%

Influence of Fluctuations in Fossil Fuel Commodities on Electricity Markets: Evidence from Spot and Futures Markets in Europe

Liu

Nakajima

et al. 2020

Energies

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Using a fresh empirical approach to time-frequency domain frameworks, this study analyzes the return and volatility spillovers from fossil fuel markets (coal, natural gas, and crude oil) to electricity spot and futures markets in Europe. In the time domain, by an approach developed by Diebold and Yilmaz (2012) which can analyze the directional spillover effect across different markets, we find natural gas has the highest return spillover effect on electricity markets followed by coal and oil. We also find that return spillovers increase with the length of the delivery period of electricity futures. In the frequency domain, using the methodology proposed by Barunik and Krehlik (2018) that can decompose the spillover effect into different frequency bands, we find most of the return spillovers from fossil fuels to electricity are produced in the short term while most of the volatility spillovers are generated in the long term. Additionally, dynamic return spillovers have patterns corresponding to the use of natural gas for electricity generation, while volatility spillovers are sensitive to extreme financial events.

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“…This volatility could be a source of revenue for thermal generation, but Nordic producers have not enjoyed it like producers in other markets. In addition to VRE and hydro, factors that make the future price level and power production mix of Nordic countries uncertain include developments in nuclear power, emission price, industry exports, and other electricity demand [31]. The estimation of such variables as those mentioned is difficult in a long-term forecast.…”

Section: Introductionmentioning

confidence: 99%

Is District Heating Combined Heat and Power at Risk in the Nordic Area?—An Electricity Market Perspective

2018

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The Nordic power market has exceptionally low carbon emissions. Energy efficient combined heat and power (CHP) plays an important role in the market, and also produces a large share of Nordic district heating (DH) energy. In future Nordic energy systems, DH CHP is often seen as vital for flexibility in electricity production. However, CHP electricity production may not be profitable in the future Nordic market. Even currently, the prevailing trend is for CHP plants to be replaced with heat-only boilers in DH production. In this work, we aim to describe the future utilisation of CHP in the Nordic area. We use an electricity market simulation model to examine the development of the Nordic electricity market until 2030. We examine one main projection of electricity production capacity changes, and based on it we assess scenarios with different electricity demands and CO 2 emission prices. Differences between scenarios are notable: For example, the stalling or increasing of electricity demand from the 2014 level can mean a difference of 15 e/MWh in the average market price of electricity in 2020. The results of this paper underline the importance of considering several alternative future paths of electricity production and consumption when designing new energy policies.

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The plunge in German electricity futures prices – Analysis using a parsimonious fundamental model

Cited by 50 publications

References 27 publications

The impact of intraday markets on the market value of flexibility — Decomposing effects on profile and the imbalance costs

The impact of intraday markets on the market value of flexibility — Decomposing effects on profile and the imbalance costs

Influence of Fluctuations in Fossil Fuel Commodities on Electricity Markets: Evidence from Spot and Futures Markets in Europe

Is District Heating Combined Heat and Power at Risk in the Nordic Area?—An Electricity Market Perspective

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