Eyes on the Price: Which Power Generation Technologies Set the Market Price?

Eike Blume-Werry, Thomas Faber, Lion Hirth, Claus Huber, and Martin Everts
Authors registered in the RePEc Author Service: Lion Hirth () and Martin P. Everts ()

Economics of Energy & Environmental Policy, 2021, vol. Volume 10, issue Number 1

Abstract: Upon discussion of price setting on electricity wholesale markets, many refer to the so-called merit order model. Conventional belief holds that during most hours of the year, coal- or natural gas-fired power plants set the price on European markets. In this context, this paper analyses price setting on European power markets. We use a fundamental electricity market model of interconnected bidding zones to determine hourly price-setting technologies for 2020. We find a price-setting pattern that is more complex and nuanced than the conventional belief suggests: across all researched countries, coal- and natural gas-fired power plants set the price for only 40 per cent of all hours. On some markets, the price setting is characterised by a high level of interconnectivity-as illustrated by the example of the Netherlands. During some 75 per cent of hours, foreign power plants set the price on the Dutch market.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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