Contract durations in the electricity market: Causal impact of 15min trading on the EPEX SPOT market

Joscha Märkle-Huß, Stefan Feuerriegel and Dirk Neumann

Energy Economics, 2018, vol. 69, issue C, 367-378

Abstract: The European Power Exchange (EPEX) introduced two new products in 2011 and 2014 which reduce the delivery duration of electricity from 1h to 15min intervals. These changes to the market design aim to better reflect the intermittent power generation from renewable energy sources. However, little is known about trading in shorter intervals and its impact on the existing market. As a remedy, our evaluation first shows that the market has quickly adopted the new 15min contracts. Second, we estimate a Bayesian structural time series, which measures a causal decrease of electricity prices. Depending on the model specification, our results indicate that the reduction can be as high as 28% for existing hourly contracts subsequent to the introduction of 15min trading. Third, the use of 15min contracts coincides with intermittent power generation, as it incentivizes renewable energy providers to offer additional electricity. Altogether, our findings suggest that 15min trading is used to balance the intra-hour volatility of renewable energy sources. Consequently, this presents a blueprint for policy-makers, who can attain similar price reductions and larger feed-ins from renewable energy sources without direct costs in all countries with high shares of renewable energy sources.

Keywords: Electricity market; 15min trading; Market design; Contract duration; Bayesian structural time series; Policy implications (search for similar items in EconPapers)
JEL-codes: D53 D86 G14 Q21 Q41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988317304115
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:69:y:2018:i:c:p:367-378

DOI: 10.1016/j.eneco.2017.11.019

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().