The effects of wind power on electricity markets: A case study of the Swedish intraday market

Xiao Hu, Jūratė Jaraitė and Andrius Kazukauskas

Energy Economics, 2021, vol. 96, issue C

Abstract: We investigate the process of electricity price formation in the Swedish intraday market, given a large share of wind power in the Swedish electricity system. According to Karanfil and Li's (2017) approach, if the intraday market is efficient, with large shares of intermittent electricity in the entire electricity system, intraday prices should send signals based on scarcity pricing for balancing power. Based on this theory, we analyze Swedish electricity market data for the period 2015–2018 and find that the Swedish intraday market, despite its small trading volumes, is functioning properly. In particular, our results show that intraday price premia mostly respond to wind power forecast errors and other imbalances resulting from either supply or demand sides of the electricity market, as they should if the intraday market is efficient. The results of wind power forecast errors hold for central and southern Sweden, but not for northern Sweden where the share of wind power production is still very small. However, we find no effect of unplanned nuclear power plant outages on intraday price premia.

Keywords: Day-ahead market; Electricity; Forecast errors; Intraday market; Intraday price premia; Nuclear power outages; Sweden; Wind power (search for similar items in EconPapers)
JEL-codes: P18 Q40 Q41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:96:y:2021:i:c:s0140988321000645

DOI: 10.1016/j.eneco.2021.105159

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