Risk Premiums in the German Day-Ahead Electricity Market

Johannes Viehmann ()
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Johannes Viehmann: Energiewirtschaftliches Institut an der Universitaet zu Koeln

No 2009-1, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: This paper conducts an empirical analysis of risk premiums in the German day-ahead Electricity Wholesale Market. We compare hourly price data of the European Energy Exchange (EEX) auction and of the continuous over-the-counter (OTC) market taking place prior to EEX. As OTC price data are not publicly available, data provided by the Energy Exchange Austria (EXAA) have been used as a snapshot of the OTC market. It has been found that market participants are willing to pay both, positive and negative premiums for hourly contracts that are significantly different from zero. The largest positive premiums were paid for evening peak hours on weekdays during winter months, the period of time with the highest electricity consumption levels of the year. By contrast, night hours on weekends featuring lowest demand levels display negative premiums. Hence, findings by Longstaff and Wang (2004) can be supported that power traders in liberalised markets behave like riskaverse rational economic agents.

Keywords: Electricity trading; Risk premium; EEX (search for similar items in EconPapers)
JEL-codes: L94 N74 Q41 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2010-07-14
New Economics Papers: this item is included in nep-ene and nep-eur
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