Price determinants in the German intraday market for electricity: an empirical analysis

Simon Hagemann

Abstract

ABSTRACT

We present an investigation of hourly price determinants in the German intraday market for electricity and hypothesize that supply-side shocks may have different price effects due to nonfundamental price determinants such as the market participants' ability to make use of portfolio internal balancing and the intraday liquidity provision. Fundamental price determinants include unplanned power plant outages, forecast errors of wind and solar power production, load forecast errors, foreign demand and supply, the nonlinearity of the merit-order and ramping costs. To identify differences in the price impacts of supply-side shocks, we determined regression coefficients in multiple linear regression models and compared them with the Wald test for coefficient equality. The standard errors of the regression coefficients were calculated with the Newey-West procedure because of autocorrelation in the regression residuals and heteroscedasticity of unknown form. Our results show that the price impact of supply-side shocks is stronger if the market participant is unable to balance intraday deviations internally and if the intraday liquidity provision is low. Furthermore, the empirical results show that the fundamental determinants influence intraday prices significantly.